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Car dealers try to survive as economy, sales drop
2009-01-25
NEW ORLEANS - At this year's version of the National Automobile Dealers Association convention, survival has passed maximizing profits as the focus of the annual event. So as thousands of dealers from across the U.S. gathered Saturday in New Orleans, they were greeted by workshops entitled "Selling up in a down economy: Taking the bull by the horns" and "Tough times, tougher dealers: Saving your dealership's assets." By almost all accounts, 2009 will be among the toughest years ever faced by the roughly 20,000 new car dealerships in the U.S., with sales of cars and lightweight trucks projected to shrink by as much as 6 million vehicles from the 16.1 million sold as recently as 2007. Sales last year were 13.2 million, down 18 percent from 2007, and December sales ran at an annual rate of around 10 million. Last year's sales were the worst in 26 years. The workshops, said convention Chairman Jeff Carlson, are designed to help dealers cope with 2009 and make it to the day when the auto market bounces back. "It's our charge to serve the dealers and to help them do everything that they can to remain viable," said Carlson, who runs two Ford Motor Co. dealerships in Colorado. According to the NADA, about 900 dealerships closed last year, largely due to the economy. Another 200 dealerships were opened, the association said. Dealers selling cars made by Chrysler LLC, General Motors Corp. and Ford Motor Co. are particularly under pressure with declining sales, and the automakers are seeking to thin their ranks to make the remaining dealers more profitable. At the convention, where attendance likely will be down at least 15 percent from the 10,000 dealers and spouses who went last year, the workshops will teach dealers how to get lean and focus on areas where they're making money, Carlson said. "Those that are not, you still have them, but you have to make sure you're as efficient as possible so they don't eat you up," Carlson said. That's exactly what Phil Spady, who owns Chrysler dealerships in Columbus, Neb., and Yankton, S.D., says he is doing. Because Chrysler new-car sales are were off 30 percent last year, Spady is shifting his focus. "I'm going to pull through with the used-car business," said Spady. Jim Farley, Ford Motor Co.'s marketing chief, said he has seen dealers make dramatic cuts in expenses and employees to survive this year. All of the Detroit Three have been trying to cut their dealership ranks, which grew when they each had a larger share of the market. All three say they don't have targets, but they are focusing on metro areas that have too many dealers representing a particular brand. Companies have been trying to consolidate dealerships, but some have simply gone out of business. GM ended last year with 6,721 dealers, down 401 from December of 2007, while Chrysler saw its dealer ranks drop by 287 to about 3,300. Ford ended the year with about 3,700 dealers, about 300 less than in 2007. At each company, dealers sell far fewer vehicles on average than Toyota Motor Corp. dealers. Detroit automakers would like to change that so the remaining dealers have more capital to invest in their facilities and in hiring the best sales and service people. Automakers and analysts say that thinning dealer ranks shouldn't hurt consumers because there still are a number of brands to keep the market competitive. At GM, dealers are anxious because the company told Congress in an effort to get government loans that it intended to cut about 1,700 dealers by 2012. The company has put its Saab and Hummer brands up for sale, and it is talking to dealers about buying the Saturn brand, among other options. Pontiac will be reduced to just a few models. GM is to get $13.4 billion in loans, while Chrysler is trying for $7 billion. Mark LaNeve, GM's marketing chief, said Saturday the company is trying to manage the natural attrition that's occurring due to the economy. But he concedes dealers are still anxious, mainly about when auto sales might recover. "There's nothing we can say that is going to calm the dealers down right now," he said. With the U.S. market slumping, Chrysler has backed away from its plans to consolidate single dealerships into dealers that sell all three Chrysler brands -- Chrysler, Dodge and Jeep. Steven Manley, executive vice president of sales and marketing, said the company will still try to merge weaker dealers with stronger ones when they get into financial trouble, but it's not aggressively cutting dealerships now for fear of losing sales. "We don't want to do it at a risk of losing volume," he said. Sales in January are either about the same as a dismal December, or a little better, depending on the manufacturer. So dealers like Spady are just trying to hold on until things get better. The publicity over Chrysler and GM requesting government loans has hurt sales, but he expects that to improve as time passes. "We need them to stay out of the news for a while. It's hard to sell to a customer when 30-60 days ago they're screaming all over the news that the companies are broke," Spady said. Carlson expects things to get better, or at least stabilize, in the third quarter of the year. But if sales don't return by then, good dealers still will survive, as they did in the early 1980s when U.S. sales tanked in a recession. "Some of us older dealers have seen this before," said Carlson, who bought into the dealerships in 1982. "I will assure you that we can survive this."
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