DETROIT – New-car dealers want automakers to show them stronger evidence that multimillion-dollar showroom renovations will result in a big enough bump in vehicle sales to cover the cost, the leader of a dealers trade group said this week.

“Each year, dealers collectively invest billions of dollars in facility upgrades, much of it mandated by the auto manufacturers,” said Stephen Wade, chairman of the National Automobile Dealers Association, speaking Thursday to the Automotive Press Association.

“These costs have a significant impact on dealer balance sheets, in many cases severely straining them, and in some cases, even persuading a dealer to leave the business.”

Manufacturers frequently require a standardized architectural look for dealerships because they want to establish a brand identity and provide customer comfort that meets or exceeds competing brands.

Wade said dealers want to provide attractive stores, but that manufacturers often mandate extensive reconstruction without providing financial aid.

The National Automobile Dealers Association, or NADA, has retained Glenn Mercer, a consultant who was a partner with McKinsey & Co., to conduct a study that Wade expects to be completed by the end of this year.

“Little hard evidence exists as to the return-on-investment, either to the automaker or to the dealer,” said Wade, who owns dealerships in Utah and California.

The number of U.S. dealerships fell to 17,700 by the end of 2010, according to NADA’s annual data book. That’s 760 fewer than a year earlier.

Wade said that, overall, dealers are doing better as new-vehicle sales in the U.S. grow from 11.6 million last year to what is expected to be about 12.7 million this year.

 

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