MercoPress. South Atlantic News Agency

Lack of credit is forcing US car dealerships to close

The financial crisis is hurting automotive dealers across United States and could contribute to an estimated 700 dealerships closing this year, the US National Automobile Dealers Association Chairwoman Annette Sykora said on Tuesday.

NADA says the United States has more than 43,000 dealerships, so about 2% could close this year. Sykora, whose organization lobbied for the passage of the $700-billion Wall Street bailout, praised Congress for passing the bill but said relief has yet to trickle down to dealers. "The rescue plan is designed to free up credit markets," she said in a Detroit speech sponsored by the Automotive Press Association. "But it's too early to know whether the fix will work." Without consumer financing, an automotive dealership's business can come to a halt because 94% of car buyers finance their vehicles, Sykora said. Dealers have told the NADA that they have been unable to obtain financing even for buyers with the highest credit scores. "Dealers who have been in business for decades say they have never seen anything like this before," Sykora said. Sykora acknowledged that some dealers facing financial trouble were already having difficulty before the credit crisis began. Still, she said, dealers are having a hard time getting loans or lines of credit to purchase their vehicle inventories. Auto sales for 2008 are estimated in 13.7 million new units, below the 14 million forecast of mid year and far from the average 16 million sold units during the last decade. In related news the Detroit Free Press said General Motors is looking to sell its main offices in Detroit if it's unable to refinance 500 million US dollars from the Renaissance Center, a prominent piece of Detroit real estate, that apparently it prefers to rent rather than own. GM stresses that it is not considering moving out of the tubular structures. Any deal â€" whether a sale and lease back, or simply a loan that uses the seven-building complex as collateral â€" would be structured to provide cash to GM. But it would be part of GM's plan to increase cash flow until 2010 by 15 billion US dollars, said spokesman Dan Flores. The automaker said it will share its plans with the Detroit Police & Fire Retirement System on Thursday to gauge the pension funds' interest in investing in the building. GM paid off its debt on the Renaissance Center in May and is now assessing its options for monetizing the buildings, said spokesman Dan Flores. Raising funds with its headquarters building could generate more than 500 million in cash at a time when GM is working to cut 10 billion in costs and generate another 5 billion by selling some assets and borrowing against others. "GM has been working on several possible financing arrangements for the Renaissance Center as part of the company's efforts to bolster cash," Flores said.