DETROIT — Apparently, 258 dealers closed this year from January through July 1, according to Urban Science. While still a significant number, it's nowhere close to the record 1,603 dealers who closed up shop last year.

According to Urban Science, the higher than normal rate is due to bankruptcy closures and arbitrations, which the firm indicated will continue through the remainder of the year.

"We're not through it all yet; there will continue to be flux in the network for the remainder of 2010 as GM and Chrysler work through the aftermath of arbitration, Mercury closes down and foreign brands like Fiat and Mahindra plan to enter the U.S. market" explained John Frith, vice president of retail channel solutions for Urban Science.

"However, the worst of the resizing is behind us. The goal now is to maximize the existing network and give dealers the competitive tools they need to succeed," he highlighted.

As several states such as Maine, North Carolina, Ohio, Oregon, Utah, Wisconsin, Arkansas and Illinois enact statutes to increase post-termination payments or grant rights to terminated dealers, automakers have their hands full. The firm said OEMs need to place more focus on raising and enforcing performance and measurement standards for dealers.

"Although bankruptcy court litigation may determine the future of this legislation, the message is clear that it will be harder going forward to make the large scale cuts we saw during the past year," said Randy Berlin, global practice director for Urban Science.

Katherine Kress, vice president of customer marketing solutions for the firm, added, "In the aftermath of arbitration, reinstated dealers will focus first on recapturing customers that may have been redirected to other dealerships. Increasing sales is more important than ever before for those dealers, and a proactive strategy to reach out to the customer base is critical.

Kress noted that dealers and OEMs should partner to offer a standard marketing approach to reconnect with consumers who might have been lost or shifted to other dealers during the termination and arbitration processes.