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As car sales slump, dealers struggle to stay afloat

Bert Caldwell
Staff writer
November 9, 2008

Wendle at the Y General Manager Shayne Goff, like most car dealers, is doing everyting possible to attract buyers. The econmomic downturn has hit new car showrooms hard. (COLIN MULVANY The Spokesman-Review) Graphic: Fewer new cars sold

With the end of 2008 approaching, new-car dealers in Washington and Idaho say they will be glad to put an Edsel of a year in their rearview mirrors.

Sales have plummeted. Perhaps not as badly as elsewhere in the United States, but deeply enough that many are slashing every expense they can think of to keep the lights on and every employee working. Not all have been successful.

Although no Idaho new-car dealer has gone out of business, it may be a matter of time, said Trent Wright, executive vice president of the Idaho Automobile Dealers Association.

His counterpart in Washington, Vicki Fabre, said she knows of 12 that have folded so far elsewhere in the state this year, “and more to come.”

Since July 2006, the Washington State Auto Dealers Association has lost 38 members, a total that includes Empire Ford.

“Sales are on the skids,” Fabre said. “Each month since August has been absolutely disastrous.”

Statistics from the Washington Department of Licensing indicate 2008 sales have tracked lower than 2007 totals every month so far. After an unusually strong January, the same has held true for Spokane County.

October figures are not yet available, but Fabre said they reflect all too well the nosedives reported Monday by the major manufacturers: General Motors, down 45 percent; Chrysler, 35 percent; Ford, 30 percent; and imported makes no better, if not worse.

“These are desperate times,” she said.

But not the end times, Fabre, Wright and dealers themselves say.

Grim economic reports have created a misperception consumers cannot find the credit most need to buy a vehicle, they said, when many local lenders are anxious to make loans.

“Financing is out there,” Fabre said.

And the state needs a healthy industry, she added. Cities and other local taxing districts are beginning to feel the pangs of the industry’s woes.

Fabre said the average dealer does $36.3 million in sales annually, employs 60, and pays an average $48,000 in cash and benefits.

In 2007, $13 billion worth of new cars were sold in Washington, she said, generating the largest single slice of sales tax revenues.

But not every new car on the road came off a Washington lot, Fabre said. About 26 percent of them are purchased in Idaho, Oregon or Montana, or on the Internet. Washington collects a use tax on those vehicles when they are registered, she said, but not business and occupation tax revenues generated by in-state dealers.

She blamed the B&O tax and state documentation requirements for adding $200 to the price of a car. Buyers will drive a long way to pick up that much change, she said.

But sales are no better in Idaho.

Wright said his members are reporting sales figures as much as 40 percent below year-ago levels.

“We pretty much hit all-time lows for the last 25 to 30 years,” he said.

Domestic makes started to hurt late last year, Wright said, and the slump worsened as gas prices climbed. Last spring’s tax stimulus package helped briefly, but as the economy soured imports joined domestics on the downgrade, he said.

He said dealers have tightened their operations, reducing advertising and cutting hours or non-essential staff. So far, association membership has held at 110 franchised auto dealerships.

“If you call me Jan. 2, you might have a different story,” Wright said, adding that Idaho was not over-saturated with dealerships, as has been the case in states like Pennsylvania.

But he noted that sellers of jet-skis, snowmobiles, heavy trucks and farm implements have been falling by the wayside at the rate of 8 to 12 a month.

Association members employ 5,600, paying an average $41,000.

Wright pooh-poohed the perception there is no credit available for car buyers.

Traditional go-to lenders like GMAC Finance may be backing away from the market, he said, but banks and credit unions are eager to fill the gap. The association is helping get up to speed institutions that have not worked much with dealerships, he said.

The next eight to 12 months will be challenging, Wright said, but consumers should take advantage of the situation.

“Right now is possibly the best time to buy in the last decade,” he said.

Wendle Auto Group general manager Shayne Goff said Ford is offering incentives up to $8,500 to spur sales. The truck business strengthened the last two weeks of October, he said, adding that he hoped the momentum would carry into November.

“I’ve never been through this kind of period,” said Goff, who has sold cars since the early 1990s.

He said Wendle is leaving positions open, cutting advertising and managing inventory to keep costs down. Increased service revenues have helped offset the pressure on sales, he added.

Credit is available, Goff said, but loans will be tough for buyers still carrying a balance on their present vehicle.

He said getting the elections over with may help buyer psychology, an opinion echoed by Downtown Honda general manager Steve Coombs.

Barak Obama’s election, Coombs said, has generated optimism he expects will lift shattered consumer confidence.

He said the Washington dealers association — he sits on the executive committee — is preparing an advertising campaign to stress that credit for auto purchases has not evaporated. Lenders are coming into the showroom begging for car loans to replace withered real estate business.

Until sales recover, Coombs said Downtown Honda has shortened days and taken every other measure possible so 52 employees and their families will keep seeing a paycheck.

“I just have to believe each day is the day it’s going to turn around,” Coombs said.

Marti Hollenback, owner of Dishman Dodge, sits on the state association board, and the board of the National Automobile Dealers Association.

She said only 25 percent of Dodge/Chrysler/Jeep dealers in the country are profitable, and Dishman is one of them.

Two employees were laid off, and hours cut for others, but Hollenback said she has tried to keep her staff of 100 informed and involved in everything that can be done to hold down costs. In the winter, she noted, the dealership’s monthly utility bills run to $15,000.

She credits Dishman’s history, long-time customer relationships and community involvement for its ability to remain in the black. The hard times will pass, she said.

“We always come out of it,” Hollenback said. “It’s just a time we want to get behind us.”

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