A young boy runs through the showroom at Victory Motors. Brian Kitzman, Victory sales manager, said local interest in new cars has increased since the federal government offered large loans to American auto manufacturers

Photo by Hans Hallgren

A young boy runs through the showroom at Victory Motors. Brian Kitzman, Victory sales manager, said local interest in new cars has increased since the federal government offered large loans to American auto manufacturers

Local car dealers enjoy sales bump

National automobile industry picture remains murky

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Scott Cook's sales are down at Cook Chevrolet, but he's glad to be living in the Yampa Valley.

"We're doing better than other places nationally," he said. "The economy seems to be doing better here. You talk about the stock market, but around here, gas prices affect people a lot more than the stock market, and those are down, which helps people."

The biggest problem in Moffat County, Cook surmised, is consumer confidence, which he said is hurt by media reports that sensationalize potential issues.

"Once people can kind of see that things aren't going down the tubes, that they still have a job and they're still making the same paycheck, then things can start getting back to normal," Cook said. "I just hope everybody realizes that things are getting back to normal, here at least."

His industry, though, caused him some worry in recent months.

America's Big 3 automakers - General Motors, Ford and Chrysler - have made headlines because of their poor sales, poor management and appeals for federal money.

The situation looks better since the Fed's cash infusion, which Cook said will be important to the national economy, however distasteful tax dollar bailouts may be.

"I don't like to see government involved in business, but : we can't let the auto industry go away," Cook said.

Make no mistake, though, the industry is hurting, said Pete Ternes, director of communications for General Motors Marketing and Sales.

Beaten down

Industry-wide, U.S. car sales dropped 35.4 percent between December 2007 and December 2008, Ternes said.

Last year "was the worst decline in car sales since World War II," he said. "By all accounts, it was an awful year for every manufacturer."

General Motors' sales dropped 31.4 percent in the same time period.

However, it is not only American car companies with troubles.

Toyota saw its sales drop 36.7 percent in 2008, Ternes said.

The Japanese company announced in late December it expects its first financial loss in 71 years and will shut down construction of its second Prius plant. Honda also declared it will keep some of its factories closed for longer than it expected to start 2009.

"That's really an indicator that the economy is in trouble," Ternes said. "The whole economy is suffering right now and it's having a dramatic effect on the auto business. We tried to explain that in Washington, that it wasn't just an auto industry problem, but they didn't get it.

"I don't think they really understood we were kind of a lead indicator for what's starting to play out now in places like the retail sector."

Cook's sales show a similar situation. Although he offers Subaru vehicles in addition to General Motors and Chrysler, customers did not start buying more Subarus when domestic manufacturers discussed bankruptcy.

"It seems to be same across the board," Cook said. "People were just nervous about buying anything new."

Coming back?

Since President George W. Bush's decision to open federal funds to American auto manufacturers, General Motors sales have picked up, Ternes said. December 2008 retail sales were up about 44,000 units, or 43 percent, from November 2008.

Part of the reason for that, at least for General Motors, is some of the federal government's money went to GMAC Financial Services, a GM subsidiary that finances retailer and consumer car loans.

With government funds, GMAC regained the liquidity to offer customers lower interest rates, Ternes said.

He added it's too early to tell what the government loans will accomplish, but there has been nothing but positive feedback from dealerships.

"We've heard an overwhelming feedback thanking us; they can now get consumers back in the door," Ternes said.

In Craig, Cook and Brian Kitzman, sales manager for Victory Motors, said recent consumer activity has been good to see.

"When everybody heard about the Big 3 being in trouble, they kind of freaked out, stopped buying," Kitzman said. "I think we're staring to dig out of all this now. People are coming back in. Granted, it's a rough time."

Jerry Thompson, who owns Craig Ford, was not available to comment for this story.

Bailout trickles down

One big concern potential buyers had about new cars was whether a manufacturer's warranty would be useless if the company went belly up, Cook and Kitzman said.

There seems to be more consumer confidence in car companies now that the government has stepped into the fray.

A car company bankruptcy doesn't worry Kitzman, though.

"First, the government would never allow warranties to go unfunded," he said. "I feel, in my personal opinion, that the government will never allow the car companies to completely go down. They're an American institution. They're going to get the help they need, but they're going to have to earn some of that, too."

U.S. auto manufacturers are going to have to adjust to the market, and Victory Motors will do the same, Kitzman said.

There are no plans for the local business to take on a new franchise - such as a foreign automaker - but the company will provide what consumers want.

Ultimately, the future of Victory Motors does not hinge on the futures of General Motors and Chrysler, which make up the local dealership's inventory, Kitzman said. If either were to go out of business, Victory would lean on the other company or pick up a new franchise.

Manufacturer problems, such as slashed production, have not hurt local dealers, Cook and Kitzman said. Cook Chevrolet and Victory Motors have ample inventory and do not plan to cut staff.

And then what?

The auto industry is not isolated from the rest of the economy, Cook and Ternes agreed.

In the short term, Ternes said car prices will come down because of manufacturer incentive packages and rebates. That is how the companies can start to move new vehicles and get business going again.

In the long term, however, car prices probably will go up, he said. Manufacturers have cut production and prices will increase when supply dips.

For the auto industry to make it out of the country's recession and be viable in 10 years, consumers will have to be interested in buying new cars, Ternes said.

Cook is, as of yet, unable to divine a solution to that problem, which is less than comforting for the dealership owner.

"All we need to get the economy going is three things," he said. "I'm not sure what those three things are, but they've got to happen."

Collin Smith can be reached at 875-1794 or cesmith@craigdailypress.com

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