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Neighborly US car dealers face troubles together

Neighborly US car dealers face troubles together

No customer voices competed with the sweet harmonies flowing from the showroom speakers at Danville Chrysler Dodge Jeep.
A competitor's blue-cross emblem beckoned through the windows from the dealership across the street. But Dugan Chevrolet Pontiac didn't see many customers on that lazy afternoon either.
Downtime like this has become more common for the two suburban dealerships, which have waged a friendly competition for more than 40 years. Their sales have slid, their inventories are down, and now they both face dire warnings that their carmakers may not survive past this year without a government bailout.
"You feel for the guy across the street, the same as you do yourself," said Danville Chrysler co-owner Gary Houser.
General Motors Corp. and Chrysler LLC say they burned through a combined $34.6 billion of cash in the first nine months of this year, as U.S. auto sales have plummeted to the lowest level in more than 25 years.
Both dealerships' owners have seen the downturn firsthand, and they've shared plenty of grief as frozen credit markets have made it harder for customers with average or poor credit to buy. Those with good credit are worried about the economy and curbing their spending. Tougher terms and higher rates also have hampered the financing dealers use to stock their lots.
GM said its sales last month, if adjusted for population growth, were the worst since World War II.
Dugan Chevrolet used to carry about 450 new and used vehicles on its lot. Now, its down to between 250 and 275, said co-owner J.R. Dugan.
"I would say over the last two years, our sales have declined over 60 percent," he said.
Danville Chrysler spent several million dollars building a new home across a busy highway from Dugan. The dealership moved to the corner lot in January, when rising gas prices and weakening consumer confidence started pulling sales toward today's abysmal levels.
Houser said slow sales have forced him to trim inventory on his Chrysler lot and have strained his cash reserves.
"Our sales are not anywhere where we would like them to be, but it's not dead," he said.
The surge in pump prices, which peaked above $4 a gallon in July, pinched dealers as demand spiked for smaller, fuel-efficient cars and created inventory mismatches. Some dealers reported having a seven-day supply of the Toyota Prius when they should have had a 60-day supply. Meanwhile, SUVs were piling up and quickly losing value.
But dealers started facing pressure before they saw that sentiment shift. Chrysler owner Cerberus Capital Management LP has been pushing single-brand dealers to consolidate. GM and Ford Motor Co. also want dealers to merge for efficiency's sake.
Earlier this fall, the weak economy helped force the largest Chevrolet dealer in the country, Bill Heard Enterprises Inc., to close its 13 remaining dealerships.
Those that have survived so far are cutting as many corners as they can.
Houser has scaled back advertising and community sponsorships. He froze wages and decided to have an employee wash windows instead paying a contractor $800 to do it.
Dugan's dealership has cut its staff in half over the last three years, trimming from 102 employees to 48. Last month, it laid off nine people.
Houser has added more fuel-efficient cars like the Jeep Patriot and Dodge Caliber to his inventory. He also joined other Chrysler dealers in e-mailing Congress to support the Detroit Three automakers' request for $25 billion in federal loans to stay in business.
Houser's father, Gary Sr., founded his dealership in 1967, the same year the Dugan family started theirs. J.R. Dugan said he's known the other dealers his entire life.
"It's not your typical cutthroat, try and beat every deal they have," he said. "It's not that type of situation."
But it is a competition. Dugan watched Danville's sales volume soar beyond his in the mid- to late-1990s. That pushed the GM dealer to find a new home with more traffic.
"That's when they started rocking and rolling with their minivans," Dugan said. "They're kind of the king with minivans, still are."
Dugan's volume surpassed Danville's after its 2000 move, and the GM dealership had its U.S. 36 intersection to itself until Houser arrived.
The two dealerships share sales volumes, and they sometimes collaborate on tent sales. Lately, they've also traded tips on how to shave costs, all while keeping a sense of optimism.
"Car people, they just adapt, and they grow and they go on," Houser said. "I feel like we're going to make it."
Dugan said he thinks the media overplays the possibility of GM's bankruptcy. If it does happen, he still expects to be selling cars.
"They'll still be producing vehicles, they'll still be putting incentives on vehicles, and we would still be operating," he said.
A bankruptcy could be rough, hurting sales even more, reducing used car values and complicating warranties. It also may allow the carmakers to cancel franchise agreements normally protected by state laws.
Dugan was confident his business will survive and said he hopes to continue to have competition across the street.
"We've known them for such a long time, and they're a good family business just like we are," he said. "They're ... locally owned, locally operated.
"You can't say that about a lot of dealers around here."


Updated : 2021-10-20 02:16 GMT+08:00