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Times are tough for car dealers

Executive general manager Paul Baker says the Plant City dealership “was not in the dire condition as the other stores.”

KERI WIGINTON | Times

Executive general manager Paul Baker says the Plant City dealership “was not in the dire condition as the other stores.”

Sudden auto dealer failures like the collapse of the Bill Heard Chevrolet chain Wednesday will increasingly become part of the business landscape, especially in boom-and-bust states like Florida.

The souring economy, plummeting home values and high gas prices are driving down vehicle sales and dealer profits. As a result, more than 400 dealerships — about 2 percent of the U.S. total — will close nationwide this year, estimates the National Association of Automobile Dealers. That's at least twice the rate of closings in a strong sales year.

"In the next six months, there will be some (more) attrition," says Tom Castriota, owner of Castriota Chevrolet in Hudson. "There are guys just hanging on who didn't plan for a downturn."

The biggest Chevy dealer in America, Bill Heard Enterprises, is shuttering 13 dealerships including one in Plant City. About 150 workers will lose their jobs, said Paul Baker, executive general manager.

Hourly employees, such as mechanics, can expect to get their last paychecks, but managers won't be so lucky. The service department will stay open until all current repairs are finished.

The Plant City dealership "was not in the dire condition as the other stores were," Baker said. "We probably could have stayed open. But we are connected with the others, and we go down when they do."

Bill Heard Enterprises, which began in 1919 with one location in Columbus, Ga., bought the old Chevrolet dealership on Alexander Street in Plant City in 2000. Four years later, the company with the slogan "Mr. Big Volume" moved to a 40-acre, $30-million facility on Interstate 4.

In August 2004, the dealership sold about 500 vehicles. By last month, the number was down to 300 as customer preferences moved from trucks and sport utility vehicles to smaller, more fuel-efficient cars, said Baker.

Another Hillsborough County dealership, Bob Wilson Dodge in Tampa, closed in May after filing for bankruptcy reorganization. The company built a new facility after adding the Chrysler and Jeep brands. Soon after, sales fell off as the economy stalled.

Last year, sales of new vehicles by U.S. franchised dealers fell 2.4 percent to 16.1-million. General Motors executives told dealers Wednesday the number could be as much as 2-million less for 2008, said Castriota, the Hudson dealer.

One big reason: steep drops in housing values make it impossible for many buyers to tap home equity loans to buy a car. Also, used truck and SUV prices plummeted as gas prices shot up. With trade-ins worth less, owners stopped buying new vehicles. The days of car loans with no down payments are gone.

There's a net loss of 75 to 200 dealerships during a strong sales year, reflecting the trend of dealers consolidating brands under one roof, says Paul Taylor, chief economist for the national dealers' association.

During recessions, the loss is 400 to 600. "We think we'll see numbers normally associated with a mild recession," said Taylor. "In the 400 net loss range."

Steve Huettel can be reached at (813) 226-3384 or huettel@sptimes.com.

Times are tough for car dealers 09/25/08 [Last modified: Tuesday, September 30, 2008 2:16pm]
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