Local automotive market in turmoil
Car and truck sales at Columbia’s dealerships plummeted in the first quarter of this year. The 11 dealerships sold less than 4,000 new and used vehicles, according to Missouri Department of Revenue data, about 40 percent less than the first three months of 2008.
And that was before Chrysler and General Motors declared bankruptcy, Larry Estes lost his Dodge franchise, Pontiac announced it will end production and Lou Fusz was faced with the sale of Saturn.
Nevertheless, like most car salesmen, Gary Drewing is relentlessly optimistic.
“I think we always approach things from a positive aspect,” said Drewing, who owns the city’s four Joe Machens dealerships.
“There are a lot of people struggling out there,” he said, particularly those who have lost jobs during this severe recession. The Chrysler and GM turmoil, Drewing said, “is just a tough deal right now. They may never recover the market share they’ve lost.”
But then he added, “It opens up opportunities for other brands out there.”
Drewing’s dealerships also had declining sales in 2008 and in the first quarter. But he is going ahead with expansion plans.
Joe Machens Ford-Lincoln Mercury had double-digit first-quarter decline, although its sales fell only 3 percent in 2008 compared with 2007, and Joe Machens BMW had similar statistics. Joe Machens Toyota-Scion had a steep first quarter decline, but sales in 2008 were 29 percent higher than in 2006.
One bright spot was at Joe Machens Automotive Group, the Legend dealership Drewing bought last year from Richard Vairo that sells the Mazda, Cadillac, Mercedes-Benz and Pontiac brands. The first quarter sales were up 27 percent, and Drewing said the dealership “had a good month in May.”
(The other recent ownership change was Bob McCosh’s purchase of the Chevrolet dealership from Justin Perry. McCosh, who has run the dealership for years and previously had a minority share, declined to be interviewed about his business and the impact of the GM bankruptcy.)
Drewing is nearly finished with the expansion of BMW to a lot across the street where the Wilson’s landscaping and garden store used to be located. The construction of the Toyota dealership at the Crosscreek Center on U.S. Highway 63 and Stadium Blvd. has been delayed, but Drewing said the civil engineering at the site is under way and the groundbreaking will take place next year. He still hopes to add a Lexus franchise there.
Drewing said 40 to 50 people will be hired when the new dealership opens.
“The landscape of the car market a year from now will be very different,” Drewing said. “We’re very excited about it, although there are challenges ahead.”
Don Brown, owner of Midwest Brokerage in St. Louis, said the industry is “in uncharted waters.” He’s been involved with the buying and selling of automotive dealerships for more than 20 years and was in the car business in Jefferson City and Columbia for more than a decade.
“When all this shakes out, dealerships in larger markets will be more valuable,” Brown said. “There will be fewer players to divide up the pie and more opportunities for good operators.”
Nationally, hundreds of car dealerships have closed in the past year. Chrysler trimmed its dealerships by about 800 in June, and GM plans to reduce its dealerships from about 6,000 to 3,500 by the end of 2010.
But Columbia’s dealerships are diversified – most have a combination of U.S. and Asian brands — and none have gone out of business.
Columbia is a regional shopping center for car buyers, Brown pointed out. “In my opinion, it’s the finest market in Columbia.”
Dealers who are doing well in this market are those with strong used car sales and strong service and parts departments, Brown said, naming Machens and Albert Buick Honda GMC as two examples.
The recession caused a credit crunch, which meant that many people who wanted to buy vehicles could not arrange financing, while dealerships had a tougher time financing inventory and getting rebates from manufacturers.
The big question is whether people will start buying cars in numbers the dealers have been used to. Nationally, new vehicle sales in May were down 34 percent from May 2008, which means local sales in the second quarter could be anemic as well.