Customers hunt savings at orphaned car dealers

  • Article by: SUZANNE ZIEGLER , Star Tribune
  • Updated: May 29, 2009 - 11:18 PM

Automakers may be in trouble. Dealers may be closing. But buyers appear ready to ignore all that if the deal is good enough.

Butch and Ann Rahn
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Butch and Ann Rahn of Farmington were among those hunting for a bargain in these days of financially troubled automakers and soon-to-be-closed dealerships.

Photo: Suzanne Ziegler, Star Tribune

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After studying a list of 18 Chrysler dealerships in Minnesota that are on the chopping block, Butch and Ann Rahn of Farmington drove nearly 40 miles to Lake Elmo on Friday looking for a deal.

At the Fury Dodge-Chrysler dealership there, they test-drove a 2009 Dodge Journey and said they have no qualms about buying a new car made by a manufacturer in Chapter 11 bankruptcy and from a possibly soon-to-be-gone dealership.

"We're not worried if the dealership remains here or not," Ann Rahn said. Both felt comfortable another dealership could pick up the warranty work. The dealership was ready to wheel and deal, coming down $2,500, but upcoming landscaping expenses kept the Rahns from making the purchase.

Automakers have long feared bankruptcy, arguing that consumers wouldn't buy cars from bankrupt companies. Former President Bush even made that case as he extended the first round of government loans to automakers in December: "Consumers won't buy cars from bankrupt automakers [because] warranty values will be questioned."

But with more companies filing for bankruptcy protection -- and even giant General Motors Corp. expected to file Monday -- it has become less intimidating for consumers, who realize that companies can emerge from bankruptcy. And auto experts say that the value of the deals right now, in many cases, is helping drive away consumers' concerns.

That may be happening. J.D. Power & Associates said Friday that it expects Chrysler to outperform the industry this month nationally.

That came as a little bit of a surprise, said Jeff Schuster, executive director of automotive forecasting at J.D. Power. But he said Chrysler's bankruptcy filing late last month took away some uncertainty in the eyes of consumers.

"It's getting them back into the showroom," he said. "It's getting them to drive the vehicles, in some cases they are finding a good deal out there."

But across the industry, the picture is still bleak. U.S. auto sales in April fell 34 percent from a year earlier. Chrysler reported the sharpest decline among major automakers, falling 48 percent. GM, the largest American automaker, with 21 percent of the market, posted its smallest decline in four months at 34 percent.

And Scott Lambert, spokesman for the Minnesota Auto Dealers Association, said he's hearing anecdotally that the filing has hurt Minnesota dealers. "The Chrysler bankruptcy has pretty much chilled the market across brands," he said.

Fury learned two weeks ago that it's among the 800 dealerships across the country that the troubled automaker wants to shut down by June 9. General Motors has informed 1,100 dealerships across the country -- at least 18 of which are in Minnesota -- that it won't renew their contracts.

Longtime Lake Elmo Fury customers Robert Lieser and Yvonne Reding of Bloomington were finishing up the paperwork Friday afternoon on a new Chrysler 300 Limited. "They gave me a good deal," Lieser said. "If we all support them ... maybe Chrysler will reconsider."

Lieser said he's not concerned about warranty work if Lake Elmo Fury closes because he can bring his car to the Fury dealership in South St. Paul.

Experts say consumers are able to look beyond what took place at the top of a company.

"The fact that the company messed up its operations doesn't have a big impact on what consumers are going to buy from them today," said Jesse Toprak, senior analyst with Edmunds Inc., which compiles and analyzes automotive information. "Consumers can see things as separate."

Car buyers, he said, want the product to meet their needs, get it at a good price, have the warranty backed and have dealerships available to do any needed work. "All of the answers to those are yes," he said. "It would have been a much different story if the companies were being fully liquidated."

By guaranteeing the warranties from domestic automotive companies, the government has removed consumers' biggest concern about buying a car from the troubled automakers, he said.

That leaves consumers open to taking advantage of the bargains out there, particularly at the dealerships being cut.

"Chrysler is discounting as much as 30 to 40 percent" off sticker prices, Toprak said. "We've seen some instances of a Dodge Ram truck for nearly half of its sticker price."

Record month

Fury co-owner Jim Leonard said car-buying right now is the best value that it has been in 25 years. "Manufacturers' incentives are massive. Dealers are willing to cut their margins to get the business," he said.

In January, the dealership sold more than 100 cars, setting a record. This month, it will sell between 105 and 110, breaking it again. "We've been here for over 85 years and this will be the record sales month in our history," he said.

Selling cars is one way to show Chrysler it's making a mistake by severing its relationship with the dealer, he said. The dealership, with help from local businesses, is holding a rally today, with food, music and activities for kids.

"If a customer walks in ... we're working every angle of the spectrum to put the deal together," he said. "It's the loudest voice we have to show Chrysler that we are here and want to be here."

Suzanne Ziegler • 612-673-1707

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Butch and Ann Rahn