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Car Biz Driven to Despair

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LOS ANGELES On billheard.com, above a 9/11 memorial eagle logo, the nation's 13th-largest auto dealer posted a death notice: "Bill Heard Enterprises announced ... that it has elected to discontinue all business operations in all of our markets effective September 24, 2008. Most of the company's approximately 3,200 employees will be laid off at that time."

The financial virus spreading from Wall Street to Detroit threatens to batter what in 2007 was a $5.4 billion advertising industry, per Nielsen Monitor-Plus (more than $20 billion if you include advertising for factory, dealer, automotive service, tires, parts stores and vehicle insurance). And that doesn't include those late-night dealer ads featuring men in 10-gallon hats, as there's no good read on local advertising.

Georgia-based BHE, which operated 14 mostly GM-brand dealerships in the Southeast before expanding to Scottsdale, Ariz., sold 40,781 vehicles in 2007, says Todd Turner, president and principal analyst at Car Concepts. The reasons Heard cites for shuttering his operation have become a familiar refrain in the troubled automotive industry.

"The declining automobile market, the high price of gasoline and its effects on sales of the dealerships' core products, such as heavy trucks and SUVs, and the difficult financing conditions the automobile industry as a whole has faced because of the subprime lending industry collapse all contributed to the decision to close," Heard's site says.

Turner added that a number of alleged improprieties, including charges of false advertising, might have contributed to the Heard shutdown, but notes, "I'm sure that the pending trend of downward sales and difficulty of financing for customers made any light at the end of the tunnel dim."

"Certainly we believe that a higher percentage of the budget will be online and that tier 2 [dealer, association, retail] advertising will, as a straight factor of wholesale, diminish," said Ian Beavis, a former automotive marketer and now evp and executive client services director at Aegis Group's Carat. "Automotive marketers will also be seeking better analytics and research to better understand the market dynamics. There will still be people out there buying cars, and the trick will be to identify them and what triggers them to purchase."

Catherine Bension, CEO of search consultancy Select Resources International, while not hazarding a prediction of greater or lesser review activity, agreed that automakers might drive more resources online. "Digital is considered a tier 1 [brand] communications channel for automotive advertising," Bension said.

Beavis added that market conditions would likely drive advertising toward mobile devices as well. Analysts predict things will get worse before they get better. Car Concepts' 2008 forecast started as the industry's "most pessimistic," Turner said, projecting sales of 14.8 million.

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