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Venture

Robert Trigaux

Auto dealers scrambling for aid and survival

19

November

Wake up and good morning. Is this a small bright light in the dismal dark confronting auto dealerships? While Clearwater's AutoWay Dodge just sold its franchise to another dealer (Dayton Andrews) and Tampa's AutoWay Chevrolet closed (AutoWay is the local brand of AutoNation), and Tampa's Bob Wilson Dodge closed its doors, here comes a Texas dealer who somehow sees potential in buying the shuttered Bill Heard Chevrolet dealership in Plant City. According to the Lakeland Ledger, Grapevine,Texas-based Classic Automotive Group is acquiring the Bill Heard dealership for more than $15-million and plans to reopen late this year or early 2009, said Steve Hurley, who will be managing partner of the business. Columbus, Ga.-based Bill Heard Enterprises filed for bankruptcy protection in late September and closed all 13 of its dealerships nationwide, including the Plant City site and a Sanford location.

"We knew the Heard dealerships were in trouble long before they filed for bankruptcy," Hurley, the current general manager of Classic Chevrolet in Grapevine, told the Ledger, and added: "Even though it's a difficult economy, Florida's a desirable place. It's a Southern market and the economy will return. We see great potential."

Hurley's not blind to  Florida's economic woes, though he must see more possibilities than this observer. At 46, Hurley is moving back to Central Florida with his family to run the Plant City store. He grew up in Lakeland and graduated from Lakeland High in 1980.

Truly, he is bucking the odds. Nationwide, 590 new-car dealerships had closed through September, the National Automobile Dealers Association reports. Only 13 by then were in Florida, though more have joined the ranks. The NADA -- check out its market report for November -- predicted 700 closings by year-end -- similar to 1991, when there was a recession -- and another 900 next year. By comparison, 430 dealerships closed last year. There are about 21,000 new-car dealers.

If you haven't noticed, most dealerships closing their doors sell domestic autos, especially Chrysler and GM vehicles. And they're not taking this lying down. This week, 33 Chrysler dealers traveled to Washington to press for financial assistance for Detroit's Big Three. The group includes Chrysler's 18-member National Dealer Council. This is the week, of course, when Big Three executives make direct appeals for federal loans as Congress debates authorizing $25-billion for automakers from the $700-billion Wall Street rescue package. In return, the government would receive equity stakes in the automakers, which would agree to limit executive compensation and not use the loans to pay dividends.

According to the Detroit News, one of those Chrysler dealers lobbying this week is Florida's Jim Arrigo. (More details on Chrysler's own blog here.) He bought his Fort Lauderdale dealership in May when "everything was perfectly fine." A month later, everything wasn't.

"It can't get much worse," Arrigo, 49 and co-chairman of the Chrysler dealer council, told the Detroit newspaper. "The damage was already done. We're turning off the lights and making sure we're getting bang for our buck in advertising." Thankfully, Chrysler incentives are the best he has seen in 20 years, Arrigo said. Buyers can save $8,000, for example, on 2007 Dodge Rams. "It's helping us stay afloat," he said. But how long can Chrysler, which has been talking merger with GM amid growing fears of bankruptcy, continue to push incentives like that?

Greater Miami Chamber of Commerce CEO Barry Johnson recently made a direct appeal in the Miami Herald for federal support for the auto industry. Why? Because all of Florida would be hurt if things get worse in Detroit.

"The auto industry is a critical player in the local economies of communities in South Florida and across the state. Auto sales in Florida represent a key component of the state's revenue through sales taxes. Stagnant sales are a huge blow to our state budget, in addition to the impact on local dealers, employees and vendors. Some of our local dealers are up for sale; others are expected to close their doors in the coming months."

Where is this all heading? Probably to a slow death spiral for the domestic auto industry -- even if federal aid is delivered. There's something uniquely disturbing that the federal government can provide instant and multiple bailout funds topping $150-billion to one spendthrift insurance company -- AIG -- but can't seem to figure out how to justify a fraction of that sum to help a manufacturing industry that generates roughly one in ten jobs in the United States.

But then, everyone in charge of the bailout seems to have worked on Wall Street. So is this just a simple case of bailing out what (and who) you know?

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 12:23pm]

    

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