Credit woes, poor sales pushing some to brink
By Joyce Pellino Crane
Ford, General Motors, and Dodge dealerships northwest of Boston are among the latest casualties in an industry hit hard by tightened credit markets and plummeting car sales.
The industry is bracing for a spate of closings as the country's economic crisis deepens and manufacturers eliminate smaller outlets with lower sales volume.
"Lots and lots of dealerships are going to be going out of business," said Ray Ciccolo, state director for the National Automobile Dealers Association. "It's probably going to be our biggest attrition ever."
Ciccolo, also a board member of the Massachusetts Automobile Dealers Association, said numerous dealers are calling the association to ask for guidance on their financial woes. He is the president and CEO of Village Automotive Group in Boston, overseeing seven dealerships from Danvers to North Attleborough.
"We get calls from dealers saying they're going to be closing down, so we get feelers," he said.
An industry reliant on prices at the fuel pumps and consumer loans has been twice bludgeoned by an economy that took an overnight nosedive in September. The fiscal troubles come just as the industry is starting to produce battery-powered cars in response to fuel prices that topped $4 per gallon earlier this year.
Once popular sport utility vehicle gas-guzzlers are morphing into energy efficient crossovers. But the new technology and design creativity can't stop highly leveraged dealerships from succumbing to economic pressures.
NADA is predicting between 700 and 1,000 dealership closings nationally by the end of the year, representing almost 5 percent of the nation's 20,000 outlets. Ciccolo said he expects the same ratio among the Massachusetts organization's 465 dealers. Since January, 39 dealerships have closed their doors, according to the state Registry of Motor Vehicles, including Lowell Chrysler Jeep Dodge and Patrick Subaru North in Wilmington.
Nationwide car sales for all makes in October were down almost 35 percent as compared to the same time last year, according to www.wardsauto.com. The subprime mortgage crisis that turned a hot credit market frigid, is now spilling into the auto industry. Ninety-four percent of all buyers finance their vehicles, and most dealerships buy inventory on credit.
"Credit is the lifeblood of our industry," said Annette Sykora, NADA chairman, in an Oct. 7 speech to the Automotive Press Association. As a result, the leveraged smaller dealerships are more vulnerable to the current economic climate than those like Boch Automotive of Norwood, which has deep pockets and pays cash for its inventory, said Ernie Boch Jr., president and CEO, who is planning to expand, with a new Honda dealership in Westford.
"We have no mortgages," Boch said.
Auto sales account for 20 percent of all retail sales in the country, making its impact on the nation's economy significant. Its "huge tentacles" reach the steel, glass, plastics, and aluminum industries, said Ciccolo. Continued...
"The automobile industry is a real driving force in this economy," he added.
In Billerica, Iversen Ford closed its doors on Oct. 17, putting about 20 people out of work. Owner Bob Moran said he could not negotiate more favorable terms with the landlord.