Pumping The Brakes

B.E. auto dealers used cost cutting and customer service to avoid being wrecked by a tough economy

Purring engines and showroom shine ignite a spark in new car shoppers — but if potential buyers perceive the economy as stalled, they back away from the dealer’s window, resigned to another year with the same old ride. Despite the economic turmoil, 2002 was “the fourth best year in history for auto sales,” with 16.8 million units of new light vehicles (cars, pickups, minivans) sold, according to Paul Taylor, chief economist for the National Automobile Dealers Association (NADA). He adds that “2002 only looks somewhat modest because it follows on three record years of sales from 1999 to 2001,” at 16.9 million, 17.4 million, and 17.1 million units, respectively. Zero percent financing also helped save the Sept. 11-plagued final quarter of 2001, and revved 2002 sales.

“The record prior to 1999 was 16 million units in 1986,” Taylor says, adding that expected sales at or near 16.3 million units for 2003 will make for a strong year by historical standards. He adds, however, that the luxury car class was hurt by the stock market slump in 2002, which had been moving irregularly downward since 2000. Other vehicle categories have responded to gasoline prices: Economical four-wheel drive “crossover” vehicle sales are up, with truck-based SUVs and large pickups down.

Companies such as Ford are cutting production, which will affect manufacturers more than it will dealers, says George Pipas, U.S. sales analysis manager for Ford Motor Co. Pipas also says production cuts reflect nothing more than lower industry sales and generally precede new products because of plant changeover of tools and employee training. As for Ford’s market share, 2002 was lower than 2001. For the first three months of 2003, Ford claims 21.2% market share, compared with 20.7% for the same period in 2002.

Marjorie Staten, executive director for the General Motors Minority Dealers Association, which is independent of GM, says the dealer body has been affected by post-Sept. 11, 0% financing — advanced sales to people who would otherwise have postponed purchases. “The Middle East, the market — it all affects our dealer body,” says Staten. “It’s a global problem for us. We didn’t have it easy last year. This is the time the dealers’ experience and skills come into play,” she adds.

Although the industry saw an upswing in units sold, individual dealers did not uniformly enjoy the “fourth best year in history,” in terms of profits. Depending on the type of vehicles they sold, the economic realities of their regions, and other factors, some dealerships had to drive with the brakes on all year; others were simply driven out of business. One such casualty was Mel Farr Automotive Group (No. 2 on the 2002 BE AUTO DEALER 100 list with $353.3 million in sales), which suffered poor sales, among other problems, and dropped off the list — as did Detroit-based Riverside Ford Sales Inc. That franchise was operated by Nathan G. Conyers, one of the “Marathon Men” who held the distinction of running one of five BE 100S companies ranked on our list for 30 consecutive

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