Record 881 U.S. auto dealerships closed in 2008: data

DETROIT (Reuters) - A record 881 U.S. auto dealerships closed in 2008, with Detroit's three struggling automakers representing 80 percent of the decline, according to data released on Thursday.

In the face of tight credit and a plunge in sales of cars and trucks, about 4.2 percent of the country's 20,084 auto dealerships shut their doors, according to data firm Urban Science.

The number of closures, the bulk of which occurred in the fourth quarter, represents the biggest decline since 1991 when the company started to collect data.

The lack of credit has made it difficult for dealers to finance their vehicle inventory and for customers to secure financing to buy vehicles.

General Motors Corp, Ford Motor Co, Chrysler have also encouraged their dealerships to consolidate in a bid to streamline their retail operations and reduce competition that has hit margins.

"There has been a loss of franchises across all the manufacturers, but the Detroit Three have been hit the hardest," said John Frith, vice president at Urban Science.

"We'll see even more contraction in the next several years as the Detroit Three strategically rethink their retail counts and locations."

U.S. auto sales fell 18 percent in 2008 to 13.2 million units. Analysts and auto expects have forecast a further decline in sales to as low as 10 million units this year.

(Reporting by Soyoung Kim; Editing by Andre Grenon)