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AUTO DEALERS PREPARE FOR TOUGH TIMES

U.S. carmakers plan to close and consolidate dealerships in the face of the shaky economy.

When thousands of U.S. auto dealers gather in San Francisco this weekend, much of the talk will be about just getting through 2008.

The obstacles include a shaky economy, volatile stock market and tightening credit, setting up what economists are predicting could be the worst sales year in more than a decade.

With word Friday that Chrysler may have plans to thin its dealership ranks and the other two U.S.-based automakers looking to do the same, those left to sell another day may end up stronger - and car buyers may benefit as well.

"Fewer dealers means better prices for the customers," said Gerald Meyers, a former chairman of American Motors Corp. who now teaches leadership at the University of Michigan.

That's because dealers not making money aren't quick to offer discounts.

"If they're profitable, they won't lose the sale," Meyers said. "If they're not profitable, they might lose the sale on the margin."

Automakers this year also could again offer zero percent loans through their finance arms and other incentives to help spur sales. But 2008 may be toughest for dealers who sell cars and trucks made by the Detroit Three, all of which saw sales declines last year and are in the midst of restructuring.

"It's going to be an interesting year," said Paul Gaudet Sr., owner of a six-dealer group in Tilton, N.H.

About 10,000 dealers and their spouses will attend this year's four-day National Automobile Dealers Association convention starting this weekend, and many of the programs will help them cope with 2008. This comes as the Detroit Three want to cut dealer ranks to better match their market share, which has shrunk in recent years as competitors like Japan's Toyota Motor Corp. made gains.

"Myself and everybody else realizes were not going to sell as many new cars, but the used car business should be fairly strong," Gaudet said.

On Friday, a Chrysler dealer in Texas said the automaker plans to significantly reduce its product lineup and dealerships as it rolls out a new Project Genesis corporate initiative within the next four to five years. Chrysler has told dealers it could reduce the number of dealerships selling its cars by as much as a third, according to Alan Helfman, vice president of River Oaks Chrysler Jeep in Houston.

Chrysler LLC declined to comment, but the company said in a statement it plans to align Chrysler, Jeep and Dodge products under one roof. It says no final decisions have been made.

And just last month, General Motors Corp. CEO Rick Wagoner said the automaker wants to step up dealer consolidations. He said efforts will be specific to combining Pontiac, Buick and GMC dealerships into one channel. Ford Motor Co. also has faced the issue of too many dealers vying for too few customers.

Paul Taylor, the National Automobile Dealers Association's chief economist, has predicted annual new U.S. vehicle sales this year of 15.5-million to 15.8-million, down from 17-million as recently as 2005.

Automakers sold 16.1-million vehicles in the United States last year, and that was considered lackluster.

FAST FACTS

Rough road ahead

THE OUTLOOK: Many analysts predict 2008 will be the worst U.S. auto sales year in more than a decade. Predictions run from 15.5-million vehicles to about 16-million, down from 17-million as recently as 2005.

THE CAUSES: Adjustable rate mortgages are rising, housing values are declining, and the stock market and job market are in a funk.

THE CONVENTION: About 10,000 auto dealers will gather in San Francisco to discuss the economy and other issues at the National Automobile Dealers Association convention.

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