As the U.S. auto industry faces record low sales and the Big Three automakers are experiencing unprecedented financial trouble, local car dealers are feeling the pain too.
As sales plummet, Hartford area auto dealers say the only bright spot is the ready availability of car loans.
Nationally, car sales have dropped to their lowest level since January 1992, according to Edmunds.com, a Web site that posts auto data. When October data is finalized, sales are expected to drop about 30 percent compared with figures from a year ago. Year-over-year sales are down 15 percent.
As the auto industry scrambles to compensate for plunging sales, exacerbated this summer by gas prices that soared above $4 per gallon, car dealerships are being forced to close their doors in record numbers.
About 600 dealerships across the country have closed this year. Industry experts are estimating that an additional 2,000 will close within 18 months.
In Connecticut this year, 25 new-car dealerships have canceled licenses — meaning they either went out of business, did not pay insurance or changed location — and 97 used-car dealerships have canceled licenses, according to Department of Motor Vehicles.
Locally, three longtime dealers sold off their inventory in the summer, and former competitors are now selling those vehicles.
In August, William Morande Sr. sold his Manchester Mazda franchise to Steve Carter, who had earlier sold his Dodge franchise in Ellington to Brian Bolles of Bolles Motor. Dillon Sales and Service in Manchester also stopped selling new Ford models in July.
The situation may get even worse if a major shakeup in the U.S. auto industry is realized. Analysts have raised concerns that General Motors could run out of cash by next year, but the company has said bankruptcy is not an option.
Persistent financial troubles at GM could force the manufacturer to shut down dealerships across the country. A possible GM merger with Chrysler would also lead to cuts in jobs and dealerships nationwide.
Of the 70 Greater Hartford Auto Dealers Association dealerships, nine are associated with Chrysler and 17 are associated with GM, according to the group’s Web site.
A major loss of car dealerships could have significant ramifications for the state.
Last year, total sales for all new-vehicle dealerships in Connecticut were $9 billion — 17.7 percent of the state’s total retail sales, according to the National Automobile Dealers Association.
Dealers employ 14,388 in Connecticut, about 14 percent of the state’s total retail payroll.
James Fleming, president of the Connecticut Automotive Retailers Association, said he does not foresee another shakeup in the immediate future.
“I think many of the mergers you might see in Connecticut probably would have occurred without the financial issues,” Fleming said.
Bolles, who owns two Chrysler dealerships, said it’s too early to know how he and other local dealers would be affected by a GM-Chrysler merger.
“They’re both over-dealered and facing shrinking market shares,” he said.
Regardless of the industry’s woes, Connecticut’s auto dealers generally remain optimistic, even as customers dwindle and prices are slashed.
“If anyone wants to make a deal, there’s never been a better time to buy a car,” said Ken Crowley, president and CEO of Crowley Auto Group, which consists of seven dealerships in Bristol, Plainville and Hartford.
Bolles agrees. Last week, he sold a Chrysler truck with a sticker price of $42,000 for $30,000 after manufacturer incentives kicked in.
Even though it’s a buyer’s market right now, people looking to save money in a bad economy are less likely to make a major purchase, like a car.
Instead of trying to attract new customers, Bolles said he’s appealing to past customers for repeat business.
“The most important thing for us is to continue to service our existing customer base as best as we can,” said Bolles, an immediate past president of the GHADA.
Collegial Concern
Regardless of the slowdown, area dealers say they are doing better than their colleagues in other parts of the nation.
“Having spoken to people over the country who do what I do, Connecticut is actually doing far better than a lot of other areas,” said Fleming.
“You’re not going to see a big percentage reduction in auto retail here because the economy is stronger here and credit is still available,” he said.
Connecticut, for the most part, is shielded from the biggest problem facing the nation’s auto dealers — the unavailability of credit.
General Motors Acceptance Corp. recently announced it will not offer financing to buyers with credit scores lower than 700, effectively cutting its customer base by 25 percent, according to Automotive News. But while big banks and community banks in many parts of the country were hit hard by credit issues associated with subprime lending, Connecticut’s community banks and credit unions have seen a rush in deposits, the Hartford Business Journal reported last month. “In Connecticut and New England, in terms of credit availability, it’s the best in the country,” Fleming said.
Take Crowley’s experience. He recalls bank officials calling him because they were looking to loan out money.
“Fundamentally, if you came in today,” he said, “I’m able to get you millions of dollars in available credit.”
