Automobile Dealers

With thousands of Chrysler and General Motors Corp. dealerships closing, customers could be confronted with problems over warranty coverage, trade-ins or other matters. Both automakers pledge to make the contraction as painless as possible, but that doesn't mean there won't be problems. "When all of these relationships are disrupted, you can't help but have some elements of chaos, and some practical problems occur," said Aaron H. Jacoby, a Los Angeles lawyer who represents car dealers.

With struggling automakers expected to announce the shutdown of thousands of dealerships starting today, cities are bracing for a wave of blight. The closings will dump thousands of large, oddly configured parcels into an already reeling commercial real estate market. Many are likely to remain empty for a long time, monuments to the decline of the U.S. auto industry and the intensity of this recession.

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.

In the shadow of a big blue inflated gorilla perched on the roof, bright yellow signs shouted "Ultimate Liquidation Event." Deep price cuts, painted in bold neon letters, adorned the windshield of nearly every car on the Garden Grove dealership lot. Janice and Yao Huang arrived on a hot afternoon looking for a bargain. "We're here for the sale," Yao told Danny Covin as he approached, squinting in the sun. "We heard you are closing down. Do you have things on sale?"

Hundreds of car dealers marched on Washington this week, hoping to build public support for a bill to block General Motors and Chrysler from closing about 3,300 dealerships. These were family businesses, they said, mom-and-pop stores employing hundreds of thousands of Americans. And they were being asked to shoulder more than their share of pain in the restructuring of the auto industry. An honest political observer would acknowledge that the bill has almost no chance of becoming law.

In the next seven days, General Motors Corp. and Chrysler will tell as many as 2,000 dealers they are no longer wanted. They won't go without a fight. GM, which posted a $6-billion quarterly loss Thursday, plans to notify 1,000 to 1,500 dealers early next week that it will not renew their franchises, according to company officials.

When Heritage Lincoln Mercury closed in August, the city of Tustin felt the pain. For decades, the dealership had operated out of the Tustin Auto Center -- which has 17 other franchises -- and it was once among the largest Lincoln Mercury dealers in California. It was also a crucial source of revenue for the city, which relies heavily on taxes from automobile sales to keep afloat.

Ford Motor Co. Chief Executive Alan Mulally vowed Sunday to travel to a U.S. dealership this year and spend a couple days selling cars. Mulally, who left aircraft maker Boeing Co. to run the No. 2 U.S. automaker in September, accepted the offer during a closed-door meeting of the National Automobile Dealers Assn. in Las Vegas. Ford officials are now working on selecting a date and location.

Retail sales, hurt by a big drop in auto purchases, slowed at the start of the year, and business inventories turned in the poorest showing in 17 months. The Commerce Department reported Wednesday that retail sales essentially were flat in January, the poorest performance since a 0.2% decline in October. Business inventories basically were unchanged in December at $1.37 trillion, $147 million less than in November, the department said.

A former employee has pleaded guilty to embezzling more than $1 million from a Mercedes-Benz dealership. Under a plea agreement, David Delgado, 36, could face up to three years in federal prison when he appears for sentencing Sept. 7 and must repay the $1,053, 970 he embezzled, the FBI reported. Delgado supervised temporary employees at Mercedes-Benz of Laguna Niguel.