Monday, August 24, 2009

Car dealership closures have aesthetic, economic impact on Dallas area

Empty car dealerships dot Dallas-Fort Worth, leaving scars on the landscape and $50 million gaps in the economy from southern Dallas to Denton.

The bare lots stand as bleak symbols of jobs lost and tax revenue reduced during a recession. In some cases, long-standing family businesses have crumbled. Now-quiet Chevy and Dodge dealerships also speak loudly of the unprecedented upheaval in the auto industry.

The D-FW area has close to 20 empty dealerships, totaling about 100 acres and dozens of buildings. Half of them closed recently as part of Chrysler LLC's bankruptcy, and more vacancies are likely as struggling automakers trim their sales networks.

General Motors Corp. plans to shutter 1,100 dealerships nationwide by fall 2010 under its bankruptcy reorganization, though it hasn't announced how many will close here. The D-FW area had about 240 new-car dealerships before the recent closings.

Some remaining dealers may be able to stay open by selling used cars and other brands or focusing on repair work, but the Chrysler and GM cuts will still leave Dallas and other cities with dozens of empty buildings and lots and millions of dollars in lost sales tax revenue.

"I think they really become a blight, and they make an area look really depressed," said George Hoffer, an economics professor at Virginia Commonwealth University who specializes in the auto industry. "An auto dealership sticks out like a sore thumb because the property is so large compared to other businesses."

To some degree, the closings are part of a longtime pattern with car dealerships. They tend to open near residential areas, often in parts of town that are just beginning to develop. Over time, as growth intensifies, the land can become more valuable than the businesses, prompting the dealers to sell.

Most of the recent closings, however, are tied to tough economic times and a shrinking auto industry.

"I've never seen this many dealers go down at one time," said Jerry Reynolds, a former Ford dealer who offers auto advice on Saturdays on a local radio show. "In tough times, the weeding-out process starts."

The economic impact will be substantial. A typical new-car dealership in the Dallas area generates revenue of about $50 million a year – plus related sales taxes.

Also, job losses linked to car dealerships are contributing to Texas' unemployment rate, which rose to 7.9 percent in July. That month, jobs at Texas motor vehicle and parts dealers were down 11,600, or 7 percent, from a year earlier, according to the Texas Workforce Commission.

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