California Business Minute™

I am Tim Johnson and welcome to the California Business Minute.

With U.S. automakers reporting their worst monthly sales results of the year and no
signs of relief expected in 2009, Grant Thornton LLP Corporate Advisory and Restructuring
Services has released a report that identifies that as many as 100,000 industry-related
jobs may be at risk.

"With a more than 2 million unit sales decline likely this year compared with 2007,
followed by a prolonged slump expected next year, the downturn is placing unforeseen
levels of stress on the industry," said Kimberly Rodriguez, a Grant Thornton LLP principal.
"We expect many players do not have the cash, credit or means to see the cycle through."

Monthly sales in September were the lowest of 2008, at less than 1 million units sold
and the seasonally adjusted annual selling rate (SAAR) at 12.5 million vehicles. For the
full year, Grant Thornton analysts expect full-year 2008 sales to drop to 13.8-million units,
with the appearance of downside risk growing daily. Given the weakening economic
environment, Grant Thornton forecasts 2009 sales between 13.4- and 13.7-million units-
potentially putting, more than 100,000 jobs are at riska according to the report.

In addition, this information will subsequently manifest itself into the decline in the number
of new car dealerships.  It is forecasted to accelerate this fall and into 2009 as weak sales,
increased operational costs and the credit crunch continue to take their toll, according to
Grant Thornton LLP Corporate Advisory and Restructuring Services.

Earlier this year, Grant Thornton said more than 2,700 dealerships would need to close in
order to maintain sales per dealer at last year's level of about 750 units. Now, with light
vehicle sales on average predicted to drop to the 13.7-million unit range in 2009, the firm
estimates that 3,800 dealerships will need to close.

"Significant consolidation is necessary, especially among Ford, General Motors and Chrysler
retailers, because U.S. sales already have declined more than one million units this year,"
explained Melville. "The 'Detroit Three' account for more than 85 percent of the total decline,
and their sales per dealer were already well below the industry average." An industry observer
described the current market as "a very tough time for dealerships. It's the toughest time in the
 last 10 to 15 years in terms of sales volumes and profitability," said Jesse Toprak, executive
director of industry analysis at the Edmunds.com car-information Web site. "The weakest will
 be eliminated."

Automakers will sell about 14 million new vehicles this year, the worst year since 1993. They
had sold at least 16 million cars annually in this decade.

Before the end of 2008 or early in 2009, the tally of new-car dealerships in the United States
will fall below 20,000 for the first time since World War II, said Paul Taylor, chief economist for
the National Automobile Dealers Association.

Perhaps 600 dealerships will close this year nationally, he said, compared with 400 in 2007. So
far, about 70 have closed in California.

That not only hurts car dealers, but cities and counties in California.  For example, the city of
San Jose, where tax revenue from new-car sales are down $800,000 through the end of June.
Overall though, said Steven Brewster, a representative from the city's economic development
office, the city's tax revenue is down just 1 percent as higher gas prices have generated more
tax dollars off setting the loss from auto sales.

The national dealers association said there were 20,770 new-car dealerships in the U.S. in 2007.
They employed 1.1 million people, and contributed $693 billion to the U.S. economy.  California's
1,594 new-car dealerships had about 134,000 workers, and those stores contributed $82 billion to
the local, state and national economy in 2007.

I am Tim Johnson and this has been the California Business Minute.