Auto dealer survivors look ahead to better year

  • Article by: ALISA PRIDDLE , Detroit Free Press
  • Updated: February 16, 2012 - 4:49 PM

For the dealerships that remain after the brutal cuts of the past few years, 2012 is forecast to be a year of rising sales and profitability.

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Michael Golling outside his family’s Fiat dealership in Birmingham, Mich., near Detroit. The Golling family is one of 2,336 Chrysler dealers in the U.S. who survived Chrysler’s 2009 downsizing, during which the company terminated 789 dealers.

Photo: Kathleen Galligan , Detroit Free Press

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LAS VEGAS - As the nation's auto dealers gathered for their annual convention, the mood was driven by growing profits, the anticipation of new vehicles and the potential of social networks to boost sales as the bad memories of 2009 fade.

From 2008 through last year, the domestic automakers trimmed their dealer networks in the wake of the industry's financial meltdown.

Four General Motors brands and Ford's Mercury brand no longer exist. But in a National Automobile Dealers Association survey last March, 57.4 percent of dealers said they expected to be more profitable in the next year, the highest percentage expecting better results since the mid-1990s.

With the news that the nation's unemployment rate fell to a three-year low of 8.3 percent in January, the optimism is more sustainable.

"The energy coming out of the Detroit auto show and heading into the dealer convention is a reflection of a stronger industry," said Rod Alberts, executive director of the Detroit Automobile Dealers Association. Last weekend, more than 20,000 dealers, auto executives and exhibitors are attending the NADA convention. They came in search of information on future products and marketing plans, as well as tools to improve their businesses, especially online car-shopping services and how to use social networks to lure buyers.

Sales per dealer rose substantially from 2010 to 2011 and will be up again this year, said John Frith, vice president of retail channel solutions for Urban Science, a Detroit-based dealer consulting firm.

Urban Science is finalizing its annual study on dealer trends, and the latest statistics will show that overall sales and sales per dealer will be up substantially for a second year, Frith said.

Bill Golling, who has two metro Detroit dealerships selling Chrysler, Jeep, Dodge, Ram and Fiat brands, was attending for the first time in 20 years.

"I want to see it firsthand," Golling said of the convention and its sprawling exhibit hall. "I want to see how we compare and what works elsewhere that might work for us."

The recession in 2008 forced a lot of dealers to embrace new online techniques that can cut marketing costs in half from the average $500 per vehicle spent on traditional advertising, said Jeffrey Coats of Autobytel, an online auto purchase adviser.

John Humphrey, general manager of J.D. Power and Associates' global automotive division, said 81 percent of people now start their car shopping online, making it critical that dealers have an Internet presence and a staff trained in ways to convert those searches to sales.

Golling is one of 2,336 Chrysler dealers in the U.S. today who survived Chrysler's brutal 2009 downsizing, during which the company terminated 789 dealers. Since early 2010, 43 former Chrysler dealers have regained their franchises, and 14 applications for reinstatement are still pending, said Chrysler spokesman Mike Palese.

Today, 85 percent of Chrysler's dealers are profitable, up from 70 percent in 2009, said spokesman Ralph Kisiel.

Ford has more than 3,300 dealers today, after losing hundreds when it phased out the Mercury brand and consolidated Lincoln dealers in the largest 130 metro markets. Half of those dealers have agreed to upgrade their showrooms.

Ford spent about $150 million to shrink its Lincoln network from 500 dealers in mid-2010 to 325 today. Bob Tasca Jr., president of Tasca Automotive Group in Cranston, R.I., and chairman of the Lincoln dealer council, said the luxury brand has a long way to go, but he is glad new products are finally on their way. A Lincoln dealer meeting in Detroit in January was "a lot more upbeat than a year ago."

General Motors' retail network has shrunk from 6,375 dealers at the end of 2008 to 4,400 today as four of eight GM brands were terminated. For the first time since the mid-1970s, more than 90 percent of GM dealers are profitable, said spokesman Tom Henderson. With a smaller network selling more cars per dealership, those dealers are healthier.

"Everything should be poised for a really good year in the car business," said Autobytel's Coats. "The last time I said that was 2006 or 2007."

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