The challenge is proving to be even tougher for dealers selling domestic brands when two of the three American auto manufacturers are flirting with potential bankruptcies while simultaneously reviewing whether to shed certain models to improve business. About 80% of B.E. 100s dealers owned one of several American brand franchises which are taking the brunt of the industry’s steep sales drop as they continue to lose market share to foreign brands.
U.S. auto sales fell 41.4% in February versus the same month last year.
“There is a lot of anxiety among the dealer body,” says Gregory Jackson, owner of Prestige Automotive Group which topped B.E.’s Auto Dealer 100 list with $828 million in revenues. “Everyone’s concerned about how things will eventually shake out.”
Jackson thinks his business will be OK because it’s financially healthier than other minority-owned dealerships. But as a seller of Saturn vehicles – a money-losing brand General Motors Corp. is strongly considering killing – Jackson is assessing that part of his business.
“While I’m optimistic, I am considering my options, and I’m looking around and fielding potential opportunities to replace franchises in those Saturn locations,” Jackson says.
Phil Price, owner of Red Bluff Ford in Red Bluff, California, hasn’t ordered a new vehicle from the Ford Motor Co. in about eight months. Typically dealers order a fleet of new cars and trucks from the factory on a monthly basis to meet consumer demand. Manufactures count those vehicles as sales once they’re shipped to dealerships.
“At my store, in its heyday, we used to sell 200 cars a month,” says Price, whose dealership ranked No. 67 on the B.E. Auto Dealer 100 list with $40 million in revenues. “Now we’re lucky if we can get 40 a month.”
Because of the tightened credit market, Price has put plans to open a Honda motorcycle dealership in Torrance, California on hold. The 56-year-old businessman says he would be the first African American in the country to open a Honda motorcycle store.
As the U.S. auto companies realign their businesses to meet the change in consumer preferences, it’s expected that there will be fewer dealerships. Job losses at dealerships stood at 9,000 in February, according to the Bureau of Labor Statistics.
This year alone, 1,100 dealers could close and 200 new ones may open if the economy stays in its current state, predicts National Automobile Dealers Association (NADA) economist Paul Taylor.
Last month, consulting firm Urban Science tallied 881 dealership closures in 2008 – the largest since 1991 when the firm began collecting such data. NAMAD estimates some 200 minority-owned retailers closed last year.
To keep auto dealerships running, earlier this month, NAMAD, NADA, and the American International Automobile Dealers co-wrote a letter to President Barack Obama, imploring the president to relax rules under the term-asset backed securities loan facility to include auto financing.
The organizations are also asking that the Small Business Administration loan guaranty program be expanded to provide floor planning and working capital for auto dealers.