Without a Bailout of the Big Three, 3 Million Jobs could be lost

The waiting room at Markley Motors’ service department buzzed Tuesday as consumers waited for tune ups, oil changes and lube jobs. Some customers met with credit managers to extend their warranties.


But no one browsed the expansive South College Avenue lot during lunch hour looking for a new car.

These are tough times for local car dealers as the Big Three U.S. automakers look to Washington for financial help amid warnings their demise could lead to economic chaos.

Last week GM and Ford reported spending a combined $14.6 billion more than they took in last quarter; GM predicted it could run out of money by the end of the year and Ford said it has enough money to last through next year thanks to a hefty credit line arranged earlier.

Without a massive infusion of cash, automakers say nearly 3 million jobs will be lost, parts manufacturers will go belly up and dealerships will close. It all brings the problem much closer to home than Detroit.

Local dealers acknowledge some slump in sales as consumers worry about the economy, rising unemployment, food prices and the upcoming holidays.
“Between the gas crunch and the economy, it’s made it more difficult,” said Mark Matson, Internet sales manager at Ferrero I-25 Chrysler Jeep Dodge at the Motorplex at Centerra.

Sales dropped 20 to 25 percent this year, credit has tightened and fewer people are opting to buy new cars, he said.

New car registrations are down 5 percent through October compared to last year, according to Larimer County motor vehicle registrations.

The slump takes its toll on dealerships, employees and cities that depend on tax revenue from every new and used car sold.

Fort Collins’ tax revenue from cars purchased outside the city dipped nearly 7 percent through September and 4 percent for cars bought in town, said Jeremy Reese of the city’s sales tax division.

New cars are taxed more heavily than used cars because of their higher price tag, meaning a slump in sales results in lower tax revenue to pay for everything from police, parks and education.

“We don’t anticipate any increase in motor vehicle sales through the year and at least through the first three quarters of 2009,” Reese said.

The drop in auto sales tax revenue could indicate people are opting to buy used cars rather than new or not buying at all.

The changing economics has forced many local dealers to alter their business models.


At dealerships such as Markley, which sells Honda, Buick, GMC and Pontiac, sales are down nearly 120 units through October, said General Manager Roger Belisle.
But the service department has been crazy busy as customers put their money into fixing up and maintaining older cars rather than buying new.

It will be enough to offset the drop in sales, he said. “We anticipate being a little ahead of last year profit wise. Overall, I am not displeased.”
Traffic on the lot picked up the weekends before and after the election, indicating consumers may have been waiting to see who would replace President George W. Bush in the Oval Office before they went out and spent money on a new car.

The dealership sold 27 cars the past two weekends, which Belisle grades as a B-plus. “I’m not writing any letters home to mom to brag about my grades, but it’s a heck of a lot better than a C.”

At Ferrero, fewer cars dot the lot as management cuts back on its inventory, Matson said.

“Basically, if we had ordered 100 trucks a year ago, we probably ordered 60,” said Matson, who estimated sales are down 20-25 percent.

Tightening credit has left 10 to 15 percent of customers who typically would have gotten financing out of luck he said.

Still, Jeeps and Dodge trucks are selling thanks in part to dealer incentives and rebates.

Internet sales also have grown despite an overall 20 to 25 percent decline in sales.

“There is plenty of business to be had especially in Internet sales,” said Matson, who so far this year, has sold 243 cars online, comparable to last year.
Consumer worry is leading to cautious spending, Belisle said. “People now are more timid and not quite as anxious to make up their minds.”

Ar Foster of Fort Collins plunked down more than $2,300 she borrowed from a credit card to extend the warranty on her 2003 Buick Rendezvous SUV.

Typically, she leases a new car every few years to save herself the headaches that can come with older vehicles. The warranty on the Rendezvous expires Dec. 15.

Foster lives on a fixed income and can’t afford costly repairs or a new car.
Selling her SUV wasn’t a realistic option, either. “Can you imagine selling an SUV in this economy?” she said.

After talking with Markley’s finance department, “they convinced me I couldn’t get into a new car.”

The $2,300 will extend her warranty for three years giving her peace of mind and full coverage for major repairs, she said.

While many dealers are cautiously optimistic they can weather the economic storm, other dealers are reluctant to discuss sales at all.

Several dealers either declined to talk about their sales or did not return phone calls seeking comment.

“All the negative press that’s being written about it is just hurting the market and making it suffer that much more,” said Wendy Lampe, sales manager at Dellenbach, which sells Subarus and Suzukis.

“It makes people feel depressed reading about it and it just paralyzes more of the market,” Lampe said.

Sales of foreign cars seem to be faring a bit better, said John Carroll, president/owner of Ed Carroll Motors on South College Avenue.

Carroll’s sales are up 11 percent this year. Earlier, high gas prices helped push fuel efficient vehicles such a 50-mpg VW, which had a waiting list through the summer. As the economic slump worsened, Ed Carroll’s used vehicles started moving off the lot; sales for used vehicles are up 17 percent.

“To start with we were helped by higher gas prices because almost everything we sell is fuel efficient,” Carroll said.

“When the financial collapse occurred we had some short-term impact, but Volkswagen nationally is up 1-2 percent year-to-date. We were fortunate that we have the right brand at this time.”
VW is opening a new plant in Chattanooga, Tenn., at a time when almost every other auto maker is closing plants, Carroll said.

“It’s an extraordinary story … contrary to what’s happening with every other auto dealer and we’re benefiting through that with good sales.”