When thousands of U.S. auto dealers gather in San Francisco this weekend, much of the talk will be about just getting through 2008. The obstacles include a...
DETROIT — When thousands of U.S. auto dealers gather in San Francisco this weekend, much of the talk will be about just getting through 2008.
The obstacles include a shaky economy, volatile stock market and tightening credit, setting up what economists are predicting could be the worst sales year in more than a decade.
With word Friday that Chrysler may have plans to thin its dealership ranks and the other two U.S.-based automakers looking to do the same, those left to sell another day may end up stronger — and car buyers may benefit as well.
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“Fewer dealers means better prices for the customers,” said Gerald Meyers, a former chairman of American Motors who now teaches leadership at the University of Michigan.
That’s because dealers not making money aren’t quick to offer discounts.
“If they’re profitable, they won’t lose the sale,” Meyers said. “If they’re not profitable, they might lose the sale on the margin.”
Automakers this year also could again offer zero-percent loans through their finance arms and other incentives to help spur sales. But 2008 may be toughest for dealers who sell cars and trucks made by the Detroit Three, all of which saw sales declines last year and all of which are in the midst of restructuring.
“It’s going to be an interesting year,” said Paul Gaudet Sr., owner of a six-dealer group in Tilton, N.H.
About 10,000 dealers and their spouses will attend this year’s four-day National Automobile Dealers Association convention starting this weekend, and many of the programs will help them cope with 2008.
This comes as the Detroit Three want to cut dealer ranks to better match their market share, which has shrunk in recent years as competitors like Japan’s Toyota Motor made gains.
“Myself and everybody else realizes were not going to sell as many new cars, but the used-car business should be fairly strong,” Gaudet said.
On Friday, a Chrysler dealer in Texas said the automaker plans to significantly reduce its product lineup and dealerships as it rolls out a new Project Genesis corporate initiative.
Chrysler has told dealers that it could reduce the number of dealerships selling its cars by as much as a third, according to Alan Helfman, vice president of River Oaks Chrysler Jeep in Houston.
Chrysler declined to comment, but the company said in a statement that it plans to align Chrysler, Jeep and Dodge product offerings under one roof. It says no final decisions have been made.
And just last month, General Motors CEO Rick Wagoner said the automaker wants to step up dealer consolidations. He said efforts will be specific to combining Pontiac, Buick and GMC dealerships into one channel. Ford also has faced the issue of too many dealers vying for too few customers.
Paul Taylor, National Automobile Dealers Association chief economist, has predicted annual new U.S. vehicle sales this year of 15.5 million to 15.8 million, down from 17 million as recently as 2005. Automakers sold 16.1 million vehicles in the U.S. last year, and that was considered lackluster.
Average dealer pretax profit, though, remained fairly strong through November, up 6.6 percent compared with the year-ago period, Taylor reported. The results came despite difficulties in the new-car market, with dealers making much of their money on used cars, Taylor said.
But even that is starting to wane. NADA used-car-auction data are showing that prices are starting to drop, not just for larger vehicles but even for small four-cylinder cars that get good gas mileage.
“For the last several months we’ve seen prices falling. That’s a concern because it affects trading values on new cars as well,” he said.
But other opportunities are emerging. On Friday, GM announced a deal with online auction site eBay that includes entire GM Certified Used Vehicles on eBay Motors at no cost to its more than 3,900 certified used U.S. dealers. The companies also plan to work together to boost sales.
“GM Certified dealers will have millions more eyeballs looking at their inventory, and more traffic drives sales,” Mark Mathews, director of GM Used Vehicle Activities, said in a statement.
At Owen Ford in Jarratt, Va., owner Alton Owen Sr. said he is blessed to have a stable, older customer base that likes Ford’s current product line. The new Taurus, which hasn’t sold well across the country, is a strong product for him.
His sales were up 15 percent in January over the same month in 2007, but he worries that Ford will forget his customers as it rolls out new products, because it stopped making minivans and station wagons.
“We have to make sure we keep something in the market that they will like,” Owen said, adding that he is confident in Ford’s management team.
Gasoline prices nationwide haven’t dropped much from the peak summer driving season, leaving customers uncertain about what will happen this summer, Gaudet said.
“People just don’t know what to buy, and as a result we don’t know what to stock. It’s tough,” he said.
But there is cause for optimism. Top executives of GM and Ford have predicted a rebound in U.S. sales during the second half of the year as interest rate cuts and a possible federal economic stimulus package kick in.
“We think the pattern will be the reverse of ’07, better as the year goes on, not weaker,” said Mark LaNeve, GM’s vice president for North American sales and marketing. GM is expecting U.S. sales of about 16 million vehicles industrywide this year.
With lower interest rates, industry analysts have said auto-company financing arms likely will offer zero percent loans and other incentives to help spur sales. But with tightening credit standards, dealers will need to forge better relationships with lenders, Taylor said.
“You increase your relationship with lending institutions so that there can be greater choices for consumers who are having a hard time getting financed,” he said.
Associated Press reporters Dee-Ann Durbin and Associated Press Writer David Runk contributed to this story.