Car dealers -- sponsors of Little League, fixtures of Main Street, vibrant symbols of the American entrepreneurial dream -- could now prove to be the biggest threat to the future of the very industry they built.
For much of the last century, in exchange for selling Detroit's new models and providing a public face to distant industrial giants, dealers were richly rewarded with a steady, lucrative business and received community respect.
Now, with the industry in crisis, it's clear that there are too many outlets for the two most desperate carmakers, General Motors Corp. and Chrysler, economists and industry analysts agree.
Thinning the dealer ranks -- there are now about 9,500 locations combined for the two companies -- is key to cutting the two automakers' costs, helping to ensure that those dealers that do survive are more profitable and provide better service.
Car manufacturers don't own their dealerships. Instead, they grant franchises to businesses that buy vehicles at wholesale prices and mark them up for sale to the public, keeping the difference.
Although even some dealers concede that there are too many car lots, the trade has been profitable enough over the years that few are willing to give up their own franchises.
Contracts with dealers, meanwhile, make it nearly impossible for automakers to simply put these independent business owners out of commission, the way they can lay off employees.
"We think the marketplace should determine which dealers stay in business," said John McEleney, chairman of the national dealers association and owner of GM, Toyota and Hyundai dealerships in Iowa.
In fact, the market is forcing some contraction. The National Automobile Dealers Assn. said this week that 271 dealerships closed up shop in the first quarter alone, victims of the brutal slump in car sales. But experts say attrition isn't happening fast enough.
"A lot more people are going to have to pay this price," said Tom Marx, a business professor at Lawrence Technical Institute and former GM economist.
Last year, roughly 1,000 dealerships closed nationwide, about 680 of which were under GM or Chrysler flags. The national dealers group expects an additional 900 dealerships to close by year-end.
Toyota Motor Corp. has only about 1,400 dealers nationwide, compared with about 6,200 for GM, despite the fact that the Japanese automaker sells nearly the same number of cars. Honda Motor Co., with sales rivaling Chrysler's, has fewer than half as many dealers.
