As many as 3,800 U.S. car dealerships-nearly one in five-could fail this autumn and into 2009 because of weak sales, increased operational costs, and extremely limited credit, according to a forecast released Wednesday. “An increasing number of dealers are simply closing their doors because sales have plummeted, credit has dried up, the overall retail environment is increasingly challenging, and potential investors are sitting on the sidelines,” said Paul Melville, a partner with Grant Thornton LLP, which issued the forecast. One of the biggest General Motors Corporation (GM) dealerships filed for bankruptcy on Sunday, citing operating losses, decreased demand for vehicles, and lack of credit. Alabama-based Bill Heard Enterprises' revenue was $2.5 billion per year at its peak. With U.S. light vehicle sales expected to fall to about 13.7 million units in 2009, the Grant Thornton study said that about 3,800 dealerships—about 18 percent of the total number of U.S. car dealerships at the end of 2007—will need to close. U.S. vehicle sales are expected to be flat next year, with any recovery in demand expected only in 2010, as consumers struggle with tight credit, high gasoline prices, and a housing-market slump that is affecting the broader economy. The decline in demand has been particularly difficult for Detroit-based automakers GM, Ford, and Chrysler. GM's sales were down 18.5 percent in the first eight months of the year, while Ford's sales fell 16 percent and sales at Chrysler dropped 24 percent.
