Car Sales Really, Really Suck
By Robert FaragoOctober 7, 2008 - 1,527 views
I don’t normally link to videos if they can’t be embedded, but this cracked carafe of not good is required viewing for anyone who thinks the U.S. car industry isn’t dead in the water. The interviewee, President of NY’s Major World Auto, offers such a litany of bad news that you half expect Harold Bendell to break down and weep: banks getting out of the sub-prime biz (perish the thought), leasing is DOA, new cars aren’t selling, used cars aren’t selling that well, etc. To which the Fox newscaster replies, “Car companies are in business to sell cars. If they are not selling cars, there’s no reason for them to be in business… what are they going to do?” “If you don’t have a 700/725 [Fair Isaac Corp or FICO credit] score, nobody really wants to look at you the same way,” the harried, hapless car dealer moans. “Who wants to take a chance?” Inventory problems? “I’ve got so many cars that I want to give them away,” Bendell says. Only you know what? I believe him.
Posted in Dealer News | News Blog | 19 comments 
BMW Dealer’s Hope (BS?) Springs Eternal
By Robert FaragoOctober 6, 2008 - 824 views
I don’t suppose I have to devote much time to blogging the fact that U.S. luxury car dealers are taking it on the chin. Our Inside Baseball readers will already know that Lexus, BMW, Mercedes, Cadillac, Acura and Infiniti are all busy losing sales (although they may want to look at the numbers in this USA Today report, charting the brands’ decline since March ‘07). And “regular” people are already so freaked-out about the economic downturn that they don’t want to hear yet more evidence that the U.S. economy is going to Hell in a sub-prime-shaped hand-basket. But there’s a telling detail here– especially for anyone who’s ever wondered what happens at a car dealer’s Monday sales meeting. “Falling housing values have affected wealthy customers most in Florida and California, Johnson [president of Customer Growth Partners] says. Car dealers in those states are feeling it, but they still look for a turnaround. ‘People are a little cautious right now,’ says Tim Smith, who runs the family-owned Bob Smith BMW in Calabasas, Calif., a Los Angeles suburb. Sales dipped recently, but new models are coming by year’s end, ‘And we’re on everyone’s shopping list.’” Would it be churlish to say “not mine”?
Posted in Dealer News | News Blog | 11 comments
NADA Predicts 700 U.S. Car Dealerships Calling it Quits in ‘08
By Robert FaragoOctober 6, 2008 - 564 views
The National Automobile Dealership Association (NADA) predicts that some 700 of 21,461 U.S. car dealers are going tits up this year. And you know what? It’s still not enough carnage for domestic automakers, whose bloated dealer networks are a major millstone around their neck. (Ford, Chevrolet and Chrysler started the year with around 4k stores vs. Toyota’s 1220 dealers.) Soaring floorplan costs– the interest charged by banks to fund a dealer’s inventory– have Darwined what The Big 2.8 learned not to do when GM paid a heavy price for terminating Oldsmobile. Automotive News [sub] reports that GMAC Financial Services, Ford Credit and Chrysler Financial are the major culprits; they’ve all raised their interest rates by roughly half a percentage point in a market where inventory just kinda sits there. But here’s the real story: “Some lenders are refusing to floorplan unprofitable dealerships, to the point of recalling their loans… Bank of America supplied two of [LA chain owner Mike] Kahn’s dealerships with $60 million in floorplanning, capital loans and mortgages. Last winter, Kahn says, the bank did not want to renew the loans and raised his floorplan interest rate through the roof. ‘I never felt so betrayed… You sign this agreement and they raise your rate. Or you don’t sign and they put you out of business.’” And now, file this one under “be careful what you wish for: “Last week, key lawmakers said the Federal Reserve also has authority under ‘extraordinary circumstances’ to make special loans for dealers’ inventory costs.”
Posted in Chapter 11 | Dealer News | News Blog | one comment
Silicon Valley, U.S. Car Dealers In General, Giving-Up
By John HornerOctober 2, 2008 - 1,994 views
Back when there still was a real estate market, the San Francisco Bay area was one of the hottest. Los Gatos’ auto row included several venerable multi-generation family operations. Last year Swanson Ford gave up the ghost. Last week, Los Gatos Chevrolet hung up its spurs. Now lonely Moore Buick-Pontiac-GMC finds itself the sole survivor, stuck between the carcasses of Swanson on one side and Los Gatos Chevrolet on the other. According to the The San Jose Mercury News (SJMN), “Perhaps a dozen San Jose-area dealerships have closed in the past few years, including Silicon Valley Hummer, Stevens Creek Buick-Pontiac-GMC, Sunnyvale Dodge-Chrysler-Jeep and Sunnyvale Lincoln-Mercury this year. Smythe Volvo closed a location on Capitol Expressway Auto Mall, but remains open on Stevens Creek Boulevard.” Paul Melville of Grant Thornton LLP sums up the nationwide situation: “‘An increasing number of dealers are simply closing their doors because sales have plummeted, credit has dried up, the overall retail environment is increasingly challenging and potential investors are sitting on the sidelines… In addition, the domestic automakers who badly need retail consolidation are not spending much of their scarce capital on the problem because the economy is doing it for them.’” Even so, the dealer networks are not yet shrinking as fast as retail sales are falling. Carmageddon indeed.
Posted in Dealer News | High Finance | News Blog | Sales | 16 comments
Bailout Watch 75: Automakers Looking to Get in on the $700B deal
By John HornerOctober 1, 2008 - 550 views
Amidst all the noise about “troubled assets” and “toxic debts,” few commentators have noticed that the bailout rescue package before Congress (again) includes provisions for the government to buy-up car loans gone bad. The Wall Street Journal, “In August, tight credit caused General Motors to lose sales of roughly 10,000 to 12,000 vehicles, the car maker said. When extrapolated across the entire U.S. industry, that was the equivalent of 40,000 lost sales, or about $1 billion in revenue.” Thus, the fed’s grand plan to pick-up big dollops of the bad paper so that car dealers can get back to the business of putting people into cars and trucks they can’t afford by writing more bad paper. Personally, I think people should only buy the vehicle they can pay cash for, but if the world agreed with me then the automotive market would probably crash and burn. Americans wouldn’t even accept a China-style system, where buyers have to put down 40 percent of a vehicle purchase price in cash. Regardless, if the bailout package passes this week, you can bet The Big 2.8 will be looking to push that money straight into its dealers’ hands.
Posted in Bailout Watch | Dealer News | High Finance | News Blog | 9 comments
A Nissan Sentra for $89 a Month! Fine Print Not Included
By Robert FaragoSeptember 28, 2008 - 2,298 views
The current fiscal crisis has its roots in easy money– on all sorts of levels. But even as the new car credit market goes into deep freeze (i.e. mainstream lenders finally tighten their lending requirements) and the product pipeline is beginning to suffer from serious constipation (as dealers just say no to ‘09 inventories), plenty of stores are selling as if the go-go days aren’t gone. This press release from stuttering spinmeister Kevin Nay at Haldeman Nissan demonstrates that sales may be slow, but the pitch remains the same. “Nissan New Jersey dealer, Haldeman Nissan is now offering customers auto deals from $89 a month and with the release of their new auto deal site they are meeting the needs of frugal shoppers worldwide. For a limited time car shoppers can also take advantage of private sale offers. Nissan New Jersey dealer, Haldeman Nissan is now offering customers auto deals from $89 a month and with the release of their new auto deal site they are meeting the needs of frugal shoppers worldwide.” The $89 deal [for the Nissan Sentra] on the site has fine print aplenty– but I can’t read it. Or click on it. I’d kinda hoped the downturn would inspire dealers to clean-up their act. If anything, they’re getting worse.
Posted in Dealer News | News Blog | 27 comments
Chrysler Terminating PA Dealers; Let the Lawsuits Begin!
By Robert FaragoSeptember 23, 2008 - 2,012 views
Even as Chrysler unveils its brand new bailout bait (a.k.a. prototype electric vehicles), the ailing American automaker has finally unleashed its long-promised Holy War on “under-performing” dealers. Lawyer Richard N. Sox, Jr., Esq.’s column in Dealer Magazine reports that the Keystone State is Ground Zero in ChryCo’s campaign to shed stores. “Chrysler has finally pulled the trigger on sending out notices of termination. As of this writing, Chrysler has apparently sent 10 Pennsylvania dealers a notice that their franchises are being terminated. It is unclear why Pennsylvania appears to be the test market for these termination actions. We know from experience that Pennsylvania’s franchise protections are relatively strong compared with many other states. It may be that these dealers are particularly poor performers and thus the easiest termination cases to win.” Mr. Sox gets his Gox box socks on and sets about cleaning ChryCo’s clock (while we play the “Pennsylvania” drinking game). Suffice it to say, “Under federal and state price discrimination laws, the VPA program is illegal in a situation where the dealer MSR is inappropriately inflated such that the dealer can’t qualify for VPA incentive monies.” Or, more prosaically, “There is a strong claim for damages, which should certainly get Chrysler’s attention and give the dealer added leverage in fighting a termination action.”
Posted in Dealer News | New Cars | News Blog | 13 comments
GM Making Progress On Dealership Trim
By Edward NiedermeyerSeptember 22, 2008 - 1,217 views
We’ve long held that in order to return to a sound financial footing, GM needs to cut a huge number of dealerships from its bloated portfolio. The General is still working on the “huge number” part, but having already cut 226 dealerships this year, things seem to be headed in the right direction compared with smaller reductions of 260 and 87 stores in the last two years respectively. With 6,550 outlets still in operation, GM’s Mark LaNeve tells Automotive News (sub) that he wants the cuts to reach 400 by the end of the year.”We see (sales) recovering, but not immediately,” says LaNeve. “In that kind of a market, you’re going to have less dealer throughput, a lot of pressure on profitability.” Luckily for LaNeve, dealerships are not waiting for nasty letters from Detroit to motivate them to exit the market. “It’s no secret the business climate out here is very difficult, and there’s pressure from all sides, particularly the credit side,” says the manager of a Georgia dealer group. “GM has to get involved with this at some level to ensure the right dealers stay. It’s very difficult, and they just can’t save everybody out here.” And why would they?
Posted in Dealer News | News Blog | 19 comments
GM Car Czar Reveals Real Reason for Viper Sale
By Robert FaragoSeptember 8, 2008 - 1,968 views
I never considered the California Air Resource Board (CARB) a motivating force for Chrysler’s Viper model sale– until I read this WardsAuto story. “The new minimum CAFE standard of 35 mpg (6.7 L/100 km) in 2020 and additional pressure from California and 15 other states to limit carbon dioxide is part of what may force Chrysler LLC to jettison its Viper high-performance model,” Wards reported after a chinwag with GM Car Czar Bob Lutz. “‘Setting lower CO2 limits would equal setting CAFE at 43 mpg (5.5 L/100 km),’ Lutz says. ‘This is why the sale of the Dodge Viper by Chrysler makes sense, because anyone selling fewer than 50,000 vehicles annually would be exempt (from fuel-economy requirements).’” The Car Czar’s got a point! OK, OK, so California bill AB1493 sets a fleet exemption of 60k vehicles. And the EPA has denied CA the waiver they need to implement the law. And the real– and really bizarre– threat is that each state would have different fleet-wide requirements, depending on the model mix in that state. Never mind. “So if someone else bought Viper,” Bob bitches. “They could sell to capacity, but Chrysler couldn’t. This is why we are concerned about Corvette.” Bob blames the hypothetical threat on hypocritical Hollywood environmentalists. “The reason California set the exemption for less than 50,000 units is that it would mean the Hollywood folks could keep driving their Lamborghinis and Ferraris. Porsche could sell 11-mpg (21.4 L/100 km) Cayennes, but we couldn’t sell 20-mpg (11.8 L/100 km) Chevy Tahoes.” [Thanks to KixStart for the link.]
Posted in Branding | Dealer News | High Finance | News Blog | 14 comments
Sin City HUMMER Dealer Dies a Death
By Robert FaragoSeptember 8, 2008 - 1,625 views
Wall Street Journal scribe John. D Stoll gets it right: if HUMMER can’t make it in Las Vegas, it can’t make it anywhere. The fact that a Vegas-based HUMMER dealer is now as dead as a dodo indicates that the entire brand faces the same non-future. “This closing is notable because of where it is taking place and who is pulling the plug. It is, after all, one thing for enviro-friendly people in San Francisco–another city that recently lost a key Hummer dealership–to shun the brand. It is entirely different when Sin City decides the vehicles are too excessive. [Dealer owner Dan] Towbin said Las Vegas is a custom fit for Hummer. ‘It’s all about bling and it’s in the desert.’” It’s also about price (high), demand (low), resale (horrendous) and incentives (Olympian). In fact, how’s this for a parenthetical aside? “(Towbin says he was offering $6,000 in incentives, not including GM’s employee-pricing discount, hurting profit margins.)” Followed by “Hummer discounts represent 22.6% of the price of the vehicle–the highest in the industry, Edmunds.com says. And still Hummer sales are down 47% this year, the largest decline of any brand, according to Autodata Corp.” So, will anyone take this three-ton turkey off of GM’s hands? How’s that old joke go? For a nickel I will.
Posted in Chapter 11 | Dealer News | News Blog | Sales | 16 comments
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