Silicon Valley, U.S. Car Dealers In General, Giving-Up
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.
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Phil, The instant the single family dealership was overtaken by the dealer group, and no longer supported by the manufacturers it was only a question on time that the retail business would start emulating the computer business. Years ago domestic manufacturers had well thought out mechanisms to put individuals in dealerships, and with time they would become the 100% owners. This is when manufacturers preferred to have a single individual own a single dealership. 50 years ago when an individual had an opportunity through GM to get a Chevrolet dealership it was tantamount to getting a license to print money. Similar to a dot.com start up of a few years ago, with the exception that GM through Motors Holding was providing the venture capital. Obvious they had a vested interested in having this dealer succeed. With public dealer groups the manufacturers have lost some of their retail clout, and make their lives easier by pushing costs down the distribution chain to the dealer group, which then passes it on to the customer. Usually by having an aggressive business office to sell a myriad of ad ons. The life expectancy of most electronic equipement is brief, and expendable, vehicles with increased electronic content are reaching a level of parity with some of the electronic equipment. The term of a lease is 36 or 48 months...must be a coincidence that the life of a PC is about the same. The days of dealing with the dealer principle who was an intrinsic part of the community are gone. Now its the sales process, the CRM software, the sales procedure, that takes over from what used to be a one on one transaction.
Brogan Cadillac of Ridgewood, NJ informed it's customers this week that they will be closing their doors. Brogan started doing business in 1927. They survived the Depression of '29, but the Depression of '08 was too much to handle.
I for one will be glad to see the car industry go to a CarMax model. I would replace my cars more often if I didn't have to deal with a dealer. I for one don't even like to test drive the cars because my wife can't deal with the aggressive salespeople.