Automotive News  |   February 14, 2012

A projected rise in U.S. auto sales per dealership to record highs this year will test dealers' ability to continue the practices that helped them survive the recession.

Sales per dealer increased 9.6 percent to 719 vehicles last year, dealership consultant Urban Science said today in its annual Automotive Franchise Activity Report.

The figure may rise more than 9 percent to 785 in 2012, surpassing the record of 784 vehicles per dealer in 2005, the Detroit-based firm said.

That will mean some dealerships might add sales and service jobs to handle additional store traffic, said John Frith, an Urban Science vice president.

But Frith warns dealers and automakers to use caution.

"Something that the dealers and OEMs need to focus on is to not become complacent about the sales increase and to keep in place those financial controls they put in place when there was this downturn so that they can enjoy these profits and be ready for the next downturn," Frith said. "Because there will be one, hopefully not very soon, but there will be one."

Frith said the cost-cutting processes dealerships put in place during the recession vary per store. But he listed reduced staff and carrying less inventory as two examples.

"One of your expenses is labor, so if you're not selling vehicles, salesmen can get let go," Frith said. "So with the sales increase, you can expect some of those salesmen to come back, but it needs to be done in a controlled way."

The number of U.S. auto dealerships rose 0.6 percent last year to 17,767, led by Chrysler Group LLC's additions of stores selling cars from its majority owner Fiat S.p.A., according to the report.

The increase in the dealer count follows a 4.4 percent drop in 2010 and 8 percent decline in 2009.

The number of U.S. auto dealerships usually falls about 2 percent annually, said Urban Science, which has compiled its annual report since 1990. Chrysler was the largest contributor to the industry breaking that trend in 2011, adding 135 Fiat dealerships and 50 Chrysler-Dodge-Jeep stores.

GM, Chrysler

General Motors Co., the largest U.S. automaker, and Chrysler eliminated more than 2,200 dealers as part of their government-backed bankruptcy reorganizations in 2009.

Ford Motor Co. also has consolidated its dealer network as it shed the Mercury brand and cut the number of Lincoln stores in U.S. metropolitan markets.

U.S. automakers have shrunk their dealer networks to avoid having their dealers compete with each another in the same markets and to boost their profitability.

Urban Science bases its outlook for sales per dealership using the National Automobile Dealers Association's estimate that 13.9 million vehicles will be sold industrywide in the U.S. this year. The industry averaged about 16.8 million annual sales from 2000 to 2007.