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WiFi With Your Oil Change? Dealerships Go Upscale

Car Dealership cafe
CNBC.com
Car Dealership cafe

If you want to see the new face of the auto industry in America, just take a drive down to your local dealership. It probably looks brand new. The coffee might actually be palatable, and while you wait, you could sit in a comfortable diner-type booth and use free Wi-Fi.

Yes, a car dealership.

No more awful tile patterns on the floor and generic vending machines. No more plastic chairs that make the local DMV look posh.

In the United States, the auto industry has been transformed. It's no longer about expansion. It's about making existing dealerships more welcoming and more profitable. Take the Big Three, for example. General Motors and Chrysler downsized by more than 2,000 dealers in bankruptcy restructuring. In 2008, less than half of Chrysler dealers made a profit. Now, that number is 86 percent.

General Motors is now up to 90 percent profitability, and it has learned from past mistakes. The company committed $3 billion to upgrade 3,400 dealerships, and almost 1,000 are already getting the work done.

So, as American automakers continue to reduce the number of dealers — the Big Three (Ford, as well as GM and Chrysler) shut down 234 in 2011 — they're making sure what's left can compete with Hyundai, BMW and Mercedes.

The foreign brands continue to expand in the United States, while also doing equivalent investments in current dealerships. Hyundai opened 40 new dealers in 2011, more than any other auto company. Mercedes was extremely aggressive in 2011, sprucing up 300 dealerships at a cost of $1.4 billion. BMW has been investing billions in dealership upgrades since 2000 — which has not slowed down.

The new mantra of the auto dealer? Leaner in numbers, meaner on profitability ... but nicer to the American consumer.

Follow Brian on Twitter @bshactman.

Questions? Comments? Email us at SmallBiz@cnbc.com

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