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Going gets tougher for Colorado car sales

Credit crunch, drop in consumer confidence hits dealerships hard

By James Paton, Rocky Mountain News (Contact)

Published November 18, 2008 at 12:05 a.m.

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Patrick Nieto talks with a customer at Medved Autoplex in Wheat Ridge on Monday evening. "The company is off compared to what it used to be, but we're still having a good month," Nieto said. "Every day there are more and more drivers out there and a vehicle gets older."

Photo by Brian Lehmann / The Rocky

Patrick Nieto talks with a customer at Medved Autoplex in Wheat Ridge on Monday evening. "The company is off compared to what it used to be, but we're still having a good month," Nieto said. "Every day there are more and more drivers out there and a vehicle gets older."

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The economic environment for Colorado's car dealers has gone from bad to worse.

In a sign of how dire the situation has become, the owner of Daniels Chevyland in Colorado Springs has sold only two cars this month. In a typical November, Elizabeth Daniels said she would have sold about 80 vehicles.

On a day some in the industry are calling "Black Monday" because of all the layoffs, Daniels said she hugged and said goodbye to a cashier, one of 20 employees at the dealership to lose a job this year.

The car market has deteriorated rapidly due to weakening consumer confidence and a credit crunch. New car sales in Colorado now are expected to drop between 20 percent and 25 percent this year, according to Tim Jackson of the Colorado Automobile Dealers Association.

Jackson said he knows of some dealerships in Colorado that cut at least 10 percent of their staffs on Monday, but he declined to name them. "It's unfortunate. It's sad. It's a sign of the times," he said.

AutoNation's work force in the metro Denver region has declined to 1,200 from 1,400 in the past five months, said Steve Strader, president of the local market. The company's new vehicle sales nationwide dropped 15 percent in the third quarter, he said.

The Denver region was slower to enter the downturn "but now we're fully into the fray."

Dealer John Medved, who runs the Colorado company with the same name and sells Chevrolets, Cadillacs, Hummers, Chryslers and other cars, said he has been scaling back, too, reducing his total staff to 285 today from about 600 several years ago.

The dealers, like their counterparts across the nation, want politicians to extend a lifeline to the Detroit automakers, arguing that bankruptcies would have a nasty economic ripple effect. More dealers would close, and more people would lose their jobs, they said.

"I'd love to see market forces at play," Strader said. "But our country is not in a position to allow that to happen. Right now there is too much at stake."

Ford, Chrysler and General Motors, blaming a sharp drop in sales on a bad economy and a credit crisis, have said that emergency aid is critical. GM has warned that it could run out of cash by early next year and has called on dealers to help make their argument.

The Colorado dealers say the buyers have disappeared. The falling sales are partly because cars are built better and do not have to be replaced, the dealers said. But customers have grown increasingly nervous, and others in recent months have not been able to get credit or are afraid to be rejected, the dealers said.

"The credit foundation has been knocked out from under the economy," Strader said.

The dealers also are hurt by a reluctance to lend as they borrow money to pay for inventory.

Car sales have been declining steadily for years, falling nearly 25 percent between 2000 and 2007, but the demand has weakened considerably in recent months, said Jackson, who is traveling to Washington today to address members of Congress.

On average, Colorado car dealers have slashed staff by about 10 percent in 2008, Jackson estimated, with many of those cuts coming on Friday and Monday.

Some salespeople are faring better than others, and Jackson said he could "count on one hand" the Colorado dealers that have been forced to close so far. Relatively strong population growth has helped offset the economic weakness, he added.

Still, that would change if the trend continues.

Dealer Doug Moreland said he believes he is in at least slightly better shape with sales down 10 percent to 15 percent this year. He said he has not been forced to resort to layoffs. At least not yet.

"If things get worse, it's something we might have to do," Moreland said.

Comments

  • November 18, 2008

    7:50 a.m.

    Suggest removal

    rwmorrisonjr writes:

    A lot of this also has to do with people who bought cars and are now so upside-down with their loans that they can't afford to get out of them. I went looking at cars on Saturday and the only way I could get out of my current vehicle was to go into something bigger, and my payment would increase by 50%, so I walked away.

    However, not all dealers are hurting. I was at Go Toyota on Saturday and the showroom was packed, so people are still buying cars.

  • November 18, 2008

    8:05 a.m.

    Suggest removal

    SlowWalker writes:

    I note that the dealers aren't willing to cut the prices of their new vehicles, either.
    Do they really expect us to pay that much in times like these?

    I don't have to ... I'll wait until early next year when private owners are desparate to get rid of their new and almost-new vehicles, then purchase something at a bargain rate.

  • November 18, 2008

    8:09 a.m.

    Suggest removal

    Videobarbs writes:

    Has anyone else noticed that year after year, the car makers introduce bland, unimaginative cars for more and more money? The car shows introduce "concept cars" that will come on-line in five or more years - how exciting.
    It's sad that the dealers are forced to lay-off employees, but the handwriting's been on the wall for sometime. I look at the parking lot at my apartment complex and see nothing but junkers,
    "beaters" or the cheapest of imports. I fear that we will never return to the days when Detroit ruled and we need to reinvent ourselves with new industries and jobs.

  • November 18, 2008

    10:59 a.m.

    Suggest removal

    Zay writes:

    Buying new isn't worth it for US cars these days - when you depreciate by 1/4 just by driving it off the lot and when it's 5-6 years old it's worth 20% of what you paid? How is that worth me spending the money? I have 3 US cars right now, I've only ever bought Detroit vehicles, but right now I can't justify buying another after looking at my trade-in values are, and what my neighbour's Toyota and Honda trade-in values are.

    I'm going to drive my cars until they fall to little pieces and then get something that will hold its value, be economical and likely (and it hurts me to say it finally) be green.

    I know that the dealers have to pay a fee to have all those cars sitting around day by day, lower the dang prices, make a little less but move more cars. I'm glad that CO Auto hasn't gotten hit as hard as most of the rest of the US, but they will if they don't retool how they do business. While an auto bailout may help short term, if practices don't change from the top to the bottom, this will likely just happen again. GM has been bleeding money for longer than the 'economic downturn.'

  • November 18, 2008

    11:56 a.m.

    Suggest removal

    ofcourse writes:

    Ok... cars 101. The manufacturer owns the cars. What dealer could buy 300 cars. The dealer pays the insurance while on the lot. You pay for transport to the region and haha dealer prep. There are several built profit lines in each car. No matter what you pay the dealer makes money. The biz calls auto's that won't sell "lot rot" and the longer a car sits the more the manufacturer will deal on the car. Know whats selling and what's not and you have an advantage.

    Think about the amount of credit it takes to have 200-300 cars sitting waiting to be sold. The mulitple it by 7200 dealers across the country.

    These folks just can't seem to say NO to the unions. Maybe now they'll know that $72 per hour with benifits can't be sustained. You unions are / were not good stewards of their rank and file. Both managed themselfs into the problem, now they want me to bail them out. Who gets fired? And who doesn't get to be union boss anymore......and by the way, how much to the union leaders make?

    Nuts!!!

  • November 18, 2008

    12:24 p.m.

    Suggest removal

    KING writes:

    automakers for some time have produced too many cars which are too high priced and that contain technology that is outdated rather than inovative. No bailout for these companies who have seen the handwriting on the wall for years. Instead compete like the rest of the world. Make a car for $2500 like they are doing in India..and we shall see what happens to the market

  • November 18, 2008

    3:29 p.m.

    Suggest removal

    adamggardner writes:

    I just bought a new subaru and paid exactly 9% below sticker - well below invoice too. I think many of them are selling for low profit or a loss right now to reduce inventory and thus costs.