The announcements that General Motors and Chrysler planned to close thousands of dealerships generated significant excitement in the aftermarket. With so many customers losing their local dealerships, they would have to start bringing their business to the aftermarket — potentially billions of dollars in new business. The dealerships that converted to used car lots also represented potential new sales for parts distributors.

"When the closings were first announced, there was quite a bit of excitement, especially on the part of the distributors, because it looked like an opportunity to sell more parts," says Larry Northup, senior director of membership at the Automotive Aftermarket Industry Association (AAIA) and liaison to the Automotive Warehouse Distributors Association (AWDA). "But a lot of things are still up in the air, especially with the GM dealers."

Several factors drove this excitement. According to industry research firm Lang Marketing, new vehicle sales reached a record low of 10.4 million units in 2009 (the lowest in 25 years). Average vehicle age is now approximately 10 years old, and Lang expects vehicle age growth to accelerate at least 45 percent over the next five years. Product volume through dealer bays is expected to fall nearly $1 billion in 2010, and decline even faster in 2011, according to Lang.

Sensing an opportunity, a number of aftermarket distributors and franchise operations have targeted these disenfranchised dealers and their customers. Driven Brands, the owner of the Meineke, Maaco and Econo Lube brands, launched a program targeting dealerships earlier this year.

CARQUEST has established a relationship with Indianapolis-based All Things Automotive, a franchise business that has targeted former Saturn dealers. Lockhart Automotive Group in Indianapolis and Thomas Dealerships of Pennsylvania and Maryland have already signed up to convert some former Saturn and (in the case of Thomas) Ford locations. Sears Automotive, NAPA and American Tire Distributors have also targeted former OE dealerships.

"It's obviously an opportunity because of our members can sell more parts," Northup says. "I think across the board there will be opportunities for independent repair shops to pick up some bays if the dealership owner decides he's for sale, and parts suppliers may benefit as well."

However, the opportunity might not be as great as was first assumed. In part, that's because many of the GM dealerships that were targeted for closure were granted an opportunity to appeal those decisions through arbitration thanks to a law passed by the U.S. Congress in December. Then in March, GM announced it was reinstating more than 580 of the nearly 1,200 dealers that had filed for arbitration. And many customers have chosen to drive the few extra miles to a remaining dealership rather than take their business to the aftermarket.

Lang Marketing also pointed out in a recent report that the bulk of the independent service market growth in 2010 would be generated by foreign vehicles, which won't directly translate into independent distribution channel growth.

Doug Washbish, president of Moog Louisville Warehouse (which operates 21 "Bumper to Bumper" locations in the Louisville area), has worked with one dealership that has converted into a used car location, helping the owners expand their aftermarket service offerings. He says Moog has leveraged existing relationships with these dealerships, having supplied many of their collision centers with DuPont products, and sold shop supplies to others.

But the jury is still out as to whether any of these dealers can survive on used car sales (particularly since supplies are still tight) and aftermarket repairs while maintaining the type of overhead they assumed while still operating as GM or Chrysler locations.

The size of many of these dealerships is one of the primary obstacles. "These dealers have to substantially increase their service revenue and do it by offering OE quality, cost-effective options to their customers that have declined repairs in the past due to price; they have to increase their net profit; and they have to do all that with the overhead of a Taj Mahal," Washbish says. "Are any of these aftermarket franchise opportunities going to cover the cost of these huge facilities? I'm not sure they will unless they are very, very good at customer service."

For many dealers, Washbish says rebranding might not necessarily be a good idea, either. "My philosophy has been, you don't need to make this a Bumper to Bumper location. There are certainly parts of our menu that are going to be valuable to them, but their name in the community is going to have more value than NAPA or Meineke or Bumper to Bumper," he says.

Marketing the value of an aftermarket operation can also be awkward for a dealership, particularly if the owner still operates other OE nameplate facilities. "That dealer can't badmouth dealerships or use the type of campaigning that the aftermarket has historically used," Washbish says. "If you've been a dealership for 30 years, suddenly you're saying you were overcharging people all that time, but now I have an option? I don't think you can do that."

These realities have tempered some of that early excitement about the dealer closings, and even some of the franchise businesses now approaching the dealerships are keeping their goals realistic. Meineke, for instance, is primarily targeting small to mid-size locations with its Jump Start program.

"There was a lot of enthusiasm early on, but we're not seeing the massive business failure scenario that was being tossed around," Northup says. "Not all of those dealers went away entirely. Some switched brands, some became used car dealerships, some eliminated their repair businesses, and some became pure repair businesses."

That said, Washbish thinks there are still plenty of opportunities to partner with these phased-out dealerships as well as the remaining "blessed" ones as they navigate these new economic realities. "The opportunities are better than ever," he says. "All dealerships see how easily their legs could get cut out from them. Success in today's new arena will require new strategies and new vendor partners. Before, a lot of these dealers may have looked at us like we were the enemy. Now they all want to increase their service work, and they are saying 'I want to be a tire store. I need express lanes. I want to fix all makes and models. Can you help me drive cars into my bays and improve customer service?' To do that, they have to partner with an aftermarket parts specialist."

However, he cautions that "nobody has had a success story yet. Everyone is kind of sitting back now to see how things shake out. But arbitration or not, new nameplate or not, success will come to the savvy business owner and their new partners."