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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

May 14, 2009 at 10:10 AM

Dealers join the Chrysler road kill as auto crisis hits home

Top of the News: Chrysler’s bankruptcy reorganization won’t just hurt Michigan and the Midwest. Auto dealers around the country face closing.

Chrysler hopes to eliminate a quarter of its 3,200 dealers nationwide, including at least 14 in Washington state. The recession has already hit state dealerships of all models hard. Last year, at least 39 of 330 new car dealerships closed or merged.

According to the Washington State Auto Dealers Association, new-car dealerships brought in nearly $14 billion in 2007. The typical outfit has 60 employees, making an average of about $50,000 a year plus benefits. In some cities and towns, auto dealers are the cornerstone of the tax base.

For Chrysler, the bankruptcy process allows it to shrink its dealer network in a way that would have never been possible in normal circumstances. It may give the company a fighting chance. But it breaks ties, and small businesses, that in some cases stretch back generations. Next on the chopping block: The workers.

The Back Story: Based on the latest retail sales numbers, Wall Street traders are betting Costco Wholesale shares will fall, while they’re more bullish on Nordstrom. That’s the assessment of “puts” and “calls” — essentially future bets placed to lock in a share price to buy or sell later — in the Wall Street Journal.

Some 3,000 “calls” were picked up, allowing investors to Costco shares, vs. 30,000 “puts” that let them to sell it in July for $45. For Nordy’s, it was 14,000 calls vs. 9,000 puts, speculating as high as $22.50 in May.

When you think about the future landscape of retailing, meanwhile, check out this article in the New Republic: How rising house prices funded the boom shopping spree. It won’t be coming back.

Today’s Econ Haiku:

Drug wars and swine flu

Mexico’s next tragedy

A credit rate cut

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