The Drive Back
Published 10:40 pm Saturday, September 26, 2009
IRONTON — Consumers are more price conscience than ever when shopping for cars and trucks. It is something local dealerships say they have been noticing more and more.
With an ongoing recession, a shaky economy and new cars and trucks carrying an average price tag of more than $26,000, the used (or the positive spin, pre-owned) car market has grown to levels not seen in years, several area sales managers said this past week.
And it is a market, along with an increased commitment to service, that many dealerships say was instrumental in allowing them to tread water during the worst economic crisis since the Great Depression. In other words survival has supplemented maximizing profits as many dealers’ main battle cry.
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Mostly gone are those used-car lots where mustached salesmen adorned in loud polyester suits bullied prospective buyers into buying lemons with no warranties.
With customers watching every penny they spend, the opportunity for a solid and affordable used car plus no-hassle pricing and 24-hour roadside assistance, has seen the $400 billion used-car industry take off the past 12 to 18 months.
“We have concentrated much more on the used car and extended additional service of our business,” said Jerry McKnight, sales manager of Proctorville-based Hamilton Chevrolet.
McKnight said he and his sales team has had to “work smarter” in paying attention to their customers’ wants and needs, especially in this economy.
“We are dealing with a much more prepared customer,” McKnight said.
Bob Clyse, owner of Bob Clyse Buick-Pontiac-GMC shared similar sentiments.
“There has been more of a focus put on service and the used car side of the business,” Clyse said.
“As for customers, with the help of Internet marketing, they have narrowed their selections down to two or three cars by the time they have stepped onto the lot. It is actually a good thing for both the customer and the dealer.”
But despite the upswing in used car sales, the new car side of the automobile dealership is the backbone of its bottom line.
Up and down the industry, 2009 is shaping up to be among the toughest years ever faced by new car dealerships across the U.S.
The National Automobile Dealers Association projects sales of cars and lightweight trucks to shrink by as much as six million vehicles from the 16.1 million sold as recently as 2007. Sales in 2008 were 13.2 million, down 18 percent from 2007 and were the worst in 26 years.
Issues affecting the auto industry in 2009 alone have been like no other in recent history.
In the past 12 months, the industry has secured federal bridge loans and stimulus money for both General Motors and Chrysler then watched as both pulled their lines out of hundreds of dealerships nationwide — including the Chrysler, Dodge and Jeep lines from Ironton-based Harmon Motors Sales and the Pontiac line at Bob Clyse Buick-Pontiac-GMC.
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. Many of the cuts came in metro areas that had too many dealers representing a particular brand.
GM ended last year with 6,721 dealers, down 401 from December of 2007. During the summer GM announced plans to cut an additional 1,700 dealers by 2012. So far Hamilton, Clyse and Ironton-based Higgins Chevrolet have not seen the axe.
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.
“From the credit crunch to bridge loans and from bankruptcy to ‘cash for clunkers,’ it has been a year of unprecedented challenges and hard-fought successes,” John McEleney, board member of the NADA said last week. “Our industry has never been so significantly altered as it has been over the past year.”
In Ohio alone last year, the state’s nearly 900 new car dealerships sold more than $22 million annually in new vehicles, making up 14 percent of the total retail transactions state wide.
Add to it that nearly 40,000 Ohioans are employed by new-car dealerships and comprise nearly 13 percent of the Ohio’s retail sales base and the new-car industry is a vital component to the state’s economic base with sales, corporate and payroll tax revenue.
Following longer-than-usual production shutdowns and the “Cash for Clunkers” program, several dealers in Lawrence County are now saddled with sparse selections on their lots as inventories shrink to near record low levels.
“Inventories have dropped like a lead balloon,” said Clyse. “Normally we have 100-120 cars on the lot. Currently we have 40.”
Clyse said low inventory levels signal things might have “bottomed out” in the industry and could help in the economic recovery. Like a domino effect, car production results in parts and supply production that in turn results in manufacturing and steel production.
At the end of August, GM reported 379,000 cars and trucks in its supply, about half of what it had in August of last year. Ford Motor Co. had 243,000 cars and trucks, down from 461,000 a year ago.
Clyse said the current inventory levels have left him with only 11 Pontiacs on the lot. GM made the decision in April to phase out the Pontiac brand by the end of 2010, however Clyse said his stock “should be gone by the fourth-quarter of 2009.”
The removal of the Pontiac line will allow lot space for the expansion of the Buick line, said Clyse, who is “very optimistic” for the future.
“The quality of cars is so similar that it comes down to things like excellent service.”
Calls to Harmon’s, Higgins and Beford Ford were not returned as of press time.
As for the future, McKnight reserved judgment.
“I don’t know what’s going to happen to the new car business. I can’t at this time gauge it.”