Suburban auto landscape changing with industry

For years, Golf Road in Schaumburg has been like a mecca for car buyers.

The strip offered miles of national and international brands, attracting car buyers from throughout the suburbs.

But its face is changing. Even before Chrysler and General Motors announced plans this week to close dealerships, Schaumburg's "auto row" was transforming as the industry and the economy changed. So far, it appears the Chrysler and General Motors contingents there may have been spared this week's cuts, but the area still reflects the transition affecting auto sales throughout the suburbs.

General Motors Corp. on Friday told about 1,100 dealers nationwide, or nearly 20 percent of its U.S. network, that they will be cut by the automaker in late 2010 because their sales are weak. Thursday, Chrysler sent similar announcements to nearly 800 dealerships nationwide, including more than 40 in Illinois.

In Schaumburg, Zeigler Chyrsler Jeep Dodge is safe, according to information released by Chrysler. Woodfield Chevrolet and Hummer's immediate outlook was not clear, and GM did not identify the dealers it was closing. But both consolidated in the last year, leaving vacant lots. Then, Kia closed about three months ago, leaving yet another empty lot. Twenty-three dealerships remain in Schaumburg.

GM left it up to franchise owners to report the decision to customers. Dealers contacted by the Daily Herald Friday either didn't return calls or declined to comment.

"We're trying to work with the owners to market those sites and bring in more retail," said Schaumburg economic development coordinator Matt Frank. "We have to look at other uses. We need to be realistic. It likely won't be another auto dealer."

While GM doesn't own the dealers, its network is too big, causing dealers to compete with each other and giving shoppers too much leverage to talk down prices and hurt the company's future sales.

"Too many dealers, in actuality, are a problem," Mark LaNeve, GM's vice president of North American sales and marketing, said in a conference call with reporters.

The cuts are part of a larger GM plan to drop 2,600, or nearly 42 percent of its 6,200 dealerships as the automaker tries to restructure outside of bankruptcy court and become profitable again. Thousands of jobs could be lost and governments will lose untold dollars in tax revenue as dealerships are forced to close.

Besides the dealership cuts, the company will provide updates to about 470 Saturn, Hummer and Saab dealerships on the status of those brands, which it plans to sell.

Friday's cuts will not be the last. GM said it expects to lose more dealers through attrition. Ultimately, about 90 percent of the remaining dealerships will stay with GM, the company said.

FedEx letters bearing the bad news began arriving Friday morning at GM franchises around the country. The letter states that dealers were judged on sales, customer service scores, location, condition of facilities and other criteria.

"Based on our review and current foreseeable market conditions and your dealership's historical performance, we do not see that GM have a productive business relationship with (your dealership) over the long term," according to the letter. A copy was obtained by The Associated Press.

However, the letter left open the possibility that the decision could be reversed.

"Please understand that our planning in this regard is not finalized, and we are prepared to give you until the end of the month to submit any information you would like us to see," the letter said.

In West Chicago, Crossroads Chevrolet Buick was lucky enough not to get that letter on Friday. This dealer will remain open, said General Manager John Kennedy.

But he said the wave of closing dealerships nationwide is "just one battle in the war."

Consumers will need to be more realistic on what they purchase, especially since the manufacturer has cut the margins, he said.

"There is no more room (to haggle)," said Kennedy. "It just doesn't exist anymore."

The Schaumburg Business Association, which includes many of the area's auto dealers, plans to announce a new promotional campaign soon to help reinvigorate the suburban dealerships.

About a dozen dealers met with the association to plan the campaign to attract consumers back to Schaumburg.

"The dealers are important to our overall economy," said Laurie Stone, president of the Schaumburg Business Association. "These companies employe people here and it will have a ripple effect if they're gone."

•Associated Press contributed to this report.