Car dealers see 'closed' in the future

Credit woes, poor sales pushing some to brink

Ford, General Motors, and Dodge dealerships northwest of Boston are among the latest casualties in an industry hit hard by tightened credit markets and plummeting car sales.

The industry is bracing for a spate of closings as the country's economic crisis deepens and manufacturers eliminate smaller outlets with lower sales volume.

"Lots and lots of dealerships are going to be going out of business," said Ray Ciccolo, state director for the National Automobile Dealers Association. "It's probably going to be our biggest attrition ever."

Ciccolo, also a board member of the Massachusetts Automobile Dealers Association, said numerous dealers are calling the association to ask for guidance on their financial woes. He is the president and CEO of Village Automotive Group in Boston, overseeing seven dealerships from Danvers to North Attleborough.

"We get calls from dealers saying they're going to be closing down, so we get feelers," he said.

An industry reliant on prices at the fuel pumps and consumer loans has been twice bludgeoned by an economy that took an overnight nosedive in September. The fiscal troubles come just as the industry is starting to produce battery-powered cars in response to fuel prices that topped $4 per gallon earlier this year.

Once popular sport utility vehicle gas-guzzlers are morphing into energy efficient crossovers. But the new technology and design creativity can't stop highly leveraged dealerships from succumbing to economic pressures.

NADA is predicting between 700 and 1,000 dealership closings nationally by the end of the year, representing almost 5 percent of the nation's 20,000 outlets. Ciccolo said he expects the same ratio among the Massachusetts organization's 465 dealers. Since January, 39 dealerships have closed their doors, according to the state Registry of Motor Vehicles, including Lowell Chrysler Jeep Dodge and Patrick Subaru North in Wilmington.

Nationwide car sales for all makes in October were down almost 35 percent as compared to the same time last year, according to www.wardsauto.com. The subprime mortgage crisis that turned a hot credit market frigid, is now spilling into the auto industry. Ninety-four percent of all buyers finance their vehicles, and most dealerships buy inventory on credit.

"Credit is the lifeblood of our industry," said Annette Sykora, NADA chairman, in an Oct. 7 speech to the Automotive Press Association. As a result, the leveraged smaller dealerships are more vulnerable to the current economic climate than those like Boch Automotive of Norwood, which has deep pockets and pays cash for its inventory, said Ernie Boch Jr., president and CEO, who is planning to expand, with a new Honda dealership in Westford.

"We have no mortgages," Boch said.

Auto sales account for 20 percent of all retail sales in the country, making its impact on the nation's economy significant. Its "huge tentacles" reach the steel, glass, plastics, and aluminum industries, said Ciccolo.

"The automobile industry is a real driving force in this economy," he added.

In Billerica, Iversen Ford closed its doors on Oct. 17, putting about 20 people out of work. Owner Bob Moran said he could not negotiate more favorable terms with the landlord. He declined to renew a lease that ends March 31, he said. This summer Moran opened Acton Toyota of Littleton on 18 acres, moving his smaller Acton operation to the site.

"Ford felt there were too many dealers in the area and they offered to buy me out," Moran said of his Billerica business.

The dealership was located at 257 Boston Road, midway between Bonnell Motors in Winchester and Drum Hill Ford in Lowell. In return for picking up Moran's area, the other two dealers participated in liquidating his inventory, he said. The local businessman who has bought and sold businesses in the area since 1969, said this was the first time he shut one down.

"It was sad that I had to close it," he said. "There's just not as many Fords on the road these days."

David Sedgwick, editor of Automotive News, said retail sales per franchise for the three major Detroit manufacturers, Chrysler, Ford, and General Motors, were "startlingly" lower than Honda, Toyota, and Nissan.

In Arlington, Hodgdon-Noyes folded in April. The dealership, which sold Buick, Pontiac, and other General Motors vehicles, sat on about 1.5 acres at 837 Massachusetts Ave., according to the town's director of assessors, Bob Greeley. According to a local news report, the family-owned dealership had been incorporated over half a century ago and was bought out by General Motors. A CVS pharmacy is being proposed for the location, according to Don Benjamin, an intern in the town's Planning Department.

In Burlington, a Dodge dealership on 12 acres of prime real estate along Middlesex Turnpike shut its doors opposite the Burlington Mall in February. Town Planner Kristin Hoffman said the land is zoned for general industrial use, but because of its prime location, retailers are expressing interest. Even Herb Chambers, who owns 43 dealerships within a 50-mile radius of Boston, considered buying the site, ultimately deciding against it because of the price, he said.

Nearby, at 62 Cambridge St., Chambers is building a Porsche-Audi dealership on 5 acres. Just down the road at 93 Cambridge St., is a second Porsche-Audi dealership that Chambers purchased in 2006 from Pass & Weisz. When reached by phone late last month, Chambers said he will move the dealership to the new site in a few weeks, and has not yet determined a use for the spot he is vacating.

Such consolidations are likely to occur across the state, according to Lawrence Gordon, principal of Acton-based Colonial Automotive Group, which oversees 14 car dealerships north and west of Lowell.

"You take one out, and two can flourish," said Gordon. "We just want to be one of the ones that are left."

Joyce Pellino Crane can be reached at crane@globe.com.