Dude, where did all the dealerships go?

nippononly

and this one is slightly unusual in that it's a Toyota dealership. This place had just spent all the money required by Toyota to upgrade and expand their dealership, barely 8 weeks before, and they are gone along with ten others, including the Nissan dealership in Fremont (also here in the Bay Area):

More Japanese car dealerships close

Another day, another Bay Area car dealership closes. Ah, but this is not one of the usual suspects. Superior Toyota/Scion in Oakland, which opened just two months ago, shut its doors suddenly on Wednesday. That's 100 jobs down the drain. Also closed were Superior Nissan in Fremont and 10 other California dealerships owned by Long Beach-based Superior Automotive Group. Bank financing withdrawn was the explanation. Not surprising, given the fact that Japanese car companies in general, and Toyota Motor Corp. in particular, are doing every bit as badly as Detroit, in some cases worse. Check out the rows and rows of unsold Toyotas on Bay Area lots.

Ripple effect: San Francisco ad agency, Attik, axed 15 employees, close to a third of its staff, earlier this month. Company executives wouldn't comment, but the layoffs came as Toyota whacked back its Scion campaign, a major account of Attik's since 2003. In these times, one also has to wonder about the prospects of another Attik account, Toyota's $300,000 Lexus sports car.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/02/26/BUL0164VE6.DTL

One of the local news programs interviewed the owner of another Toyota dealership in the area, and he said many of the Superior employees had come asking if he had any work available, but of course he really doesn't and he felt bad for them.

I'm kinda surprised that one of these big corporate dealerships failed, the pattern I'm more used to seeing is the little family places closing up.

michaellno

I'm kinda surprised that one of these big corporate dealerships failed, the pattern I'm more used to seeing is the little family places closing up.

I'm thinking that the companies that are run well are the ones that are going to survive, whether they are family run or corporations.

The dealerships that have excessive debt on their books, and are not able to secure financing for inventory, are the ones that will likely go out of business. Again, this is true regardless of how many dealerships you own and run.

nippononly

but seemingly relevant here:

US auto dealers ask Obama to help stop job losses

CHICAGO, March 4 (Reuters) - Three U.S. auto dealers' associations have asked President Barack Obama to launch policy initiatives to help save jobs in the auto retailing industry, one of the associations said on Wednesday.

The American International Automobile Dealers Association (AIADA), which represents America's 11,000 international nameplate car franchises, said the three associations sent a letter to Obama asking him "to institute policy initiatives to stave off further job loss in auto retailing, and lay the foundation for a broader economic recovery."

"The two-pronged plan includes revitalizing the asset-backed securities market for wholesale and retail auto loans and expanding the Small Business Administration loan guarantee program to provide working capital for auto dealers," the association said in a statement.

....."The auto retail industry in the United States is suffering greatly, and tens of thousands of jobs are being lost with each passing month of lower and lower car sales," said AIADA Chairman Russ Darrow. "The retail sector of our economy drives the manufacturing sector."

"In order to achieve a comprehensive economicrecovery, Congress must focus on retail, and empowering Americans to buy again," he added.

http://www.reuters.com/article/marketsNews/idUSN0421853220090304

I note with concern that it does not include any request for emergency financial aid, which means that if anything IS acted on in this request, it will be some time before its effect helps anybody at the dealership level.....

explorerx4

plus all the oil being stored, waiting for prices to rise, it seems like a big poker game. will the consumer blink first?

nippononly

What do you expect them to do, reduce all MSRPs by half once the unsold inventory gets big enough?!

And who will be doing that exactly, the manufacturers or the dealers? Because I'm sure the dealers can't afford it. But with all the money we are handing GM and Chrysler, all their vehicles SHOULD be reduced in price by half. Interesting thought - that would quickly halt the ongoing extinction of dealerships, if you could suddenly get an Aveo for $4995, a Cobalt for $6995, etc.

jb_turner

"even as the shop folds up and all the cars go back to the manufacturers."

I am not understanding why the cars go back to the manufacturers. The bank, lending institution or dealer owns the cars.

jb_turner

"But with all the money we are handing GM and Chrysler, all their vehicles SHOULD be reduced in price by half."

What do you base this on?

nippononly

I don't understand the mechanics of it, but I have read in news articles that cars were going back to their manufacturers after dealerships closed. Maybe that is only the case some of the time - I appreciate your point that they are financed by a bank which would presumably take possession of them if the dealership defaulted on its loans.

As for the half price comment, that was half tongue in cheek, but we have essentially given away $17 billion of taxpayer money so far to keep GM and Chrysler in business. We have no chance of ever seeing that money again, it was just flushed down the toilet. GM will probably sell about 2 million vehicles this year, maybe 1.75 milion, if they manage to stay in business. At that rate, we have given GM alone more than $7500 for every vehicle they will sell. Since their problem is overcapacity with no way to shed it, we should slice $7500 off the price of every vehicle they sell. We will get our bailout money back, GM will solve its overcapacity problem.

And what a boon it would be for dealers! ;-)

fezo

I suspect the cars that are going back to the manufacturer were financed by the manufacturer so essentially they are indeed going back to the bank.

I can't imagine a dealership bailout. Part of the plan to save the automakers (also a pretty doomed effort) is cutting down on dealerships. We simply can't afford as many as there are.

It's sad but i think it's inevitable.

explorerx4

dealers don't own their new vehicle inventory.

nippononly

It's heartbreaking:

US car dealer dies torching own vehicles

Following the closure of his dealership a week earlier, Pennsylvania car dealer Gregory Graham died of a heart attack while torching new vehicles that remained on his lot.

....It was concluded that Graham, 61, died of a heart attack while he was burning the vehicles at his dealership in Ligonier, about 65km southeast of Pittsburgh.

Graham was a third-generation dealer selling Buick, Pontiac and Jeep vehicles. His grandfather, Albert, started Graham Colonial Motors in the 1920s. Graham’s father, Charles, later took over.

The dealership owed more than US$420,000 in 2008 federal tax liens and more than Us$11,000 in county property-tax liens, according to court records.

http://www.caradvice.com.au/25419/us-car-dealer-dies-torching-own-vehicles/

I wonder if he did it out of anger or because they were insured and he owed money on them. It's a VERY bad time to be a new car dealer. :-(

carthell

Ick, ick, ick. There was probably a better way to handle the situation. The IRS and the local gov't. gets every scrap of value left of his estate, and his family (if they're lucky) might have enough savings to bury him because he essentially canceled his life insurance policy upon lighting the first match.

lemko

What the heck was the point of torching the vehicles after his dealership closed? At that point, it really doesn't matter. Was it some futile angry gesture?

nippononly

That's what I was wondering. :-(

dtownfb

Wouldn't the vehicle go back to the manufacturer? Maybe he was upset with the manufacturer over floorplanning and wanted to send a message?

gagrice

He hated Buicks & Pontiacs

I think the IRS and government meddling in business was probably his motivation. It is getting so much worse trying to go into any kind of business.

lemko

Shoot, I'd have taken those Buicks off his hands for him! As for the Pontiacs...eh...not much I care about except for the G8 GT.

michaellno

I guess if you're going to steal, this is the way to get the most bang for your buck:

LA Times Article

boaz47

With all of these cars piling up on Ships and is storage lots and at the manufacturers test tracks and parking lots what can the do? No one will pay MSRP for a 2008 if the credit doesn't open till 2010. They will not pay MSRP for a 2009. Not when the consumer knows there is a backlog of cars just sitting there getting older by the minute. But there is a double whammy if the dealers and manufacturers blink first.

If you start unloading all that excess inventory, and there are plenty of Nissans, Toyotas and Hondas out there as well as domestics, and you price them as Nippon suggests at half price who will be in the market for a new car in the next three years? No one in their right mind will pay 28k for a new 2010 or 2011 Prius if they know there are more then enough 2009s sitting on the dock in LA. (the pictures have been posted.) Same goes with any model of any excess car. none of that will help the dealers however.

fezo

81 cars vanish from Neb. dealership "Investigators suspect inside job."

Gee, ya think?

nippononly

and you price them as Nippon suggests at half price

I only suggested that for GM cars, to get our money back from the massive bailout, and it was said in jest!

8 years of aggressively pulling forward sales with massive rebates, discounts, and whatnot sure has a profound effect.....I think the forecasts of 2000 dealers going out of business this year will prove low in the end.

boaz47

But what are you going to do with the Excess Toyotas, Hondas and Nissans? They are all still making cars and the storage is piling up. How will they price over stock from 2008 and 2009 in 2010?

nippononly

Oh there won't be much, boaz. Not from the Japanese 3. They have already cut or entirely halted production in many places overseas (and here as well, the folks at NUMMI are facing big cutbacks on their work schedules for instance). We will see them only produce half as many vehicles as usual for the '09 model year.

As for '08s I think Toyota was the only one caught flat-footed there, and they will have to offer $2000+ rebates on leftover '08s, which they are already doing. I think we will see them go well before 1-1-2010.

But dealers face a year of cutthroat competition with each other, I would guess. So much for profit margins on new car sales.

gagrice

Here is my question. You have 100s or 1000s of hybrids sitting stored without charging the batteries and a NiMH battery will go bad quickly. They do not do well discharged and especially if it is cold. A month will not hurt anything past that it is anyone's guess.

lemko

If those cars are near a marine environment, the salty air can't be good for them. Wouldn't it be weird if they shipped 'em back to Asia? Are there a lot of MBs piling up on docks on the other coast? Maybe now's an awesome time to make a heck of a deal on a S550 or E-Class that might otherwise rot on a dock?

bvdj84

I would love to take advantage of a deal, perhaps get out of my current leased GM, but that might be a small chance....

My dealer sells VW too, I thinking of doing that. My trade in might be too low.

boaz47

"Oh there won't be much, boaz. Not from the Japanese 3."

Motor Intelligence reported in February that Toyota sales were off 35.9 percent in the US. And Europe doesn’t look any better. Nissan was off 33.6 percent as of February. Now with the pictures posted of storage at the end of the year in 08. And with sales flat right now? How will they dump the cars?



http://www.businessinsider.com/unsold-cars-around-the-world-2009-2

I say hold off and wait till the prices drop like ripe fruit. In consumers simply hold off till the 2010s hit the market the prices will have to drop. Or the companies will have to make artificial reefs with the left over cars. The cars are being stored in shipping lots and receiving lots, container ships. And the world isn’t buying.

lemko

I got a good idea for all those unused cars! Let's make the ULTIMATE remake of "Gone in 60 Seconds!" :P

boaz47

"I got a good idea for all those unused cars! Let's make the ULTIMATE remake of "Gone in 60 Seconds!"

I like the idea. But there are no new cars with the drool factor of a GT 500.

Did you ever think you would see that many cars stored at the Nissan test track? And the ones stored close to the shipping docks? Can you imagine a car that has sat in one of those lots for six months in the salt air? How about after a year?

we should be able to get a great discount once the 2010s come out. There are still 08s in LA harbor. It will be like gone in 60 seconds.

fezo

Foloow up to previous post:

Car dealers found after 81 vehicles vanished

"Miranda Cervantes, the dealership's title manager, told the Scottsbluff Star-Herald she returned to work Tuesday after a day off and found the lot was virtually empty. She said the desks of Patch, Fait and Covello had been cleaned out.

"It’s been a very surprising day,' Cervantes said. 'As soon as I came in, I knew something was wrong.'"

Boy, you can't slip one by her....

boaz47

"Miranda Cervantes, the dealership's title manager, told the Scottsbluff Star-Herald she returned to work Tuesday after a day off and found the lot was virtually empty. She said the desks of Patch, Fait and Covello had been cleaned out.

"It’s been a very surprising day,' Cervantes said. 'As soon as I came in, I knew something was wrong.'"

Boy, you can't slip one by her....

hahaha.. yes she is one sharp tack. I also got a kick out of the Toyota quote about trying to Borrow 2 billion from the Japanese government. It was like they said, we don't really need it we were just trying to leverage our assets and wonder if you had an extra 2 billion to toss our way. I am sure that press release was written by the descendent of the one that wrote on December 6, 1941. We are simply sending our sailors on a vacation cruise in the Pacific. Maybe the remark was made by Yokomata B. Madeoff. Distant relative of Bernie. They aren't as bad as our manufacturers but they sure lie like one.

what was that song, "don't worry, be Happy"? or the guy from Wham, "Ya gotta have Faith.'?

nippononly

had a little editorial on their newscast today where they mentioned that "some people are wondering" if the automakers might not be better off selling cars directly to consumers, rather than through dealerships.

Edward Lapham pointed out that this wouldn't be in the automakers' favor, as right now all their product is paid for as soon as it leaves their sights (which is why dealers are suffering so much - THEY are the ones paying for it!). But to me it seems like it would be a huge benefit to the customers (us) - buying a car would be just like buying a loaf of bread, no haggling and hours wasted, no rude salespeople and ultra-annoying F&I people, just one fixed price, buy the car at what is essentially invoice in the present system plus a fee for transportation to your local delivery center.

I kinda like it, and if enough dealers fold, we may be forced into such a system!

gagrice

I was visiting friends this morning. The GMC dealer close to their home is GONE. Toyota had expanded from next door and took over the GMC place. One less that GM has to buy out. There are still 6 GMC dealers in the area.

boaz47

If, and that is a big if, GM pulls this whole thing off they could be better off financially because of Union Concessions and reduced dealership commitments. I don't think they will recover for a very long time no matter what. I still believe they would have been better off filing for BK and dumping the UAW all together but at least they got rid of some of the costs. Now if they can just learn that an entry level car does not need to cost more than 8k they could do just fine. I know we have gotten used to small compacts in the 15k range but that is just like houses. They have been over priced for years. I can remember last December finding how much you can save because of sales in the box stores. If they could sell at 50 percent discounts and still make a profit then we have been fooled for a very long time.

It is time the consumer got some more respect.

fezo

I don't know when exactly this happened but we had a reduction of a dealership nearby without losing any availability of makes.

There was a Mazda-Linoln-Mercury dealer. Not my favorite place but they'd been there quite some time. They are gone now but the Ford dealer picked up the Lincoln-Mercury part and the Chevy dealer now has added Mazda.

boaz47

I know it is a bit childish on my behalf but there are some local dealers I will not shed a tear over. There is a Ford dealer in Riverside that I always believed were crooks. There is a Buick dealer in town that I believe used to rip my mother in law off for years. There is a Subaru dealer in San Bernardino I would like to see go but because it is the only one close to the auto plaza it would be hard on the owners of local Subarus.

fezo

I know what you mean, though. If we have to lose some dealerships I certainly have candidates in mind....

stever

I've been hearing bad stuff about the Boch Toyota and Honda dealerships in Boston all the way back here in Boise. Word gets around fast these days.

boaz47

Word gets around fast these days.

Isn't that the way it should have worked before this crisis? We have just become so accustomed to being treaty badly by dealers that we assume we have no choice. But there have been dealers in the past that developed a relationship with their customers and that in turn developed loyalty. That is why people often see some merit in saving the industry but show little concern for the dealers. At least that is how it seems.

stever

Someone posted about buying factory direct in recent days but I've forgotten who and where. But maybe this photo will be the wave of the future?

boaz47

Now that is what I call a change we can use. Hahaha.

nippononly

Now there's a good idea! LOL

fezo

For the advanced DIYer....

explorerx4

my car was run into by someone from behind.
i went to the dealer at which i have bought many cars to get an estimate from their body shop, which i have also used several times.
it was shut down. :sick:

fezo

Now see? If you had the lego car you could just rebuild it yourself...

nippononly

When was the last time you were there for service? Has it been gone less than a year?

nippononly

The biggest of which is Asbury:

Asbury Automotive reports 1st annual loss since going public

Dealership group receives 'going concern' warning

March 16, 2009 - 9:52 am ET
UPDATED: 03/16/09 5:09 p.m. ET

Asbury Automotive Group posted a loss in 2008 -- its first red ink for a full year since it became publicly traded -- and received a warning from auditors that it may not remain current in its debt covenants.

The company said auditors from Deloitte & Touche LLP think the uncertainty over the debt covenents "raises substantial doubt about the company's ability to continue as a going concern."

Auditors' "going concern" warnings typically occur for companies at risk of filing for bankruptcy protection.

Asbury reported a $365.4 million net loss in the fourth quarter, down from $11 million in net income in the same period in 2007. That quarter dragged the dealership group to an annual net loss of $338 million, compared with a $51 million net gain in 2007.

Rare losses

The annual loss was Asbury's first since going public in 2002, and the quarterly loss was the second in that period, according to Bloomberg data. The dealership group's other fourth-quarter loss came in 2003.

And they weren't the only ones:
Two other auto companies said today that would get the warning: Supplier Visteon Corp. and dealer group Sonic Automotive Inc. General Motors and supplier American Axle & Manufacturing Holdings Inc. also have received such warnings this month. More suppliers are expected to join that group.

http://www.autonews.com/apps/pbcs.dll/article?AID=/20090316/ANA05/903160282/1078- - /FRONTPAGE
(registration link)

And one that for me is much closer to home, as it is the owner of several dealerships in my area, Lithia. Didn't know that it has been ailing for some time though:

Also today, publicly held Lithia Motors Inc. reported a $4.3 million net loss in the fourth quarter. That was an improvement from a $4.78 million net loss in the same period the previous year.

The loss contributed to a $252.6 million net loss for 2008, down from a $21.5 million net gain in 2007.

The Medford, Ore., dealership group saw revenue from same-store sales of new vehicles during the quarter fall 39.2 percent, while revenue from used-vehicle retail sales at its 93 stores fell 17.4 percent.

Didn't know they were based in the Medford area. Seems like dealership groups reporting large losses are being hit harder in new car sales than they are in used. When these large groups fail, the fallout is fairly spectacular, with often a dozen or more dealerships all closing at once. To me it's pretty amazing that they can sustain an annual loss of $200 million or $300 million and continue to operate. I mean, these aren't gigantic corporations like the automakers or tier 1 suppliers.

It seems like at some point we MUST reach an equilibrium of sorts, where this trend of dealership failures begins to weaken....

stever

We have some Lithia shops here in Boise too.

I wonder how Cal Worthington is doing. Spot may be going hungry if they are having to cut back on the dog food.

gagrice

I thought Cal Worthington filed for bankruptcy. I know the big Ford agency in Anchorage was still open in October when I was there.

When I took my test drive in the BMW X5 diesel I mentioned that I was also going to test the ML320 CDI at the dealer down the street. His comment, Makes no difference they are all owned by Penske. So all the high end auto dealers on that one row of dealerships was under the Penske banner. Yet you do not see his name on any of them. I think there are about a dozen dealers on that street. Not sure how they are doing. I know it was not a busy day when I was in there.

plan_man

In February, I had a momentary interest in testing a Volvo V50 T5R, so I trotted on down to Pleasanton Volvo. Surprise! They ain't no stinkin' Pleasanton Volvo no more! Actually, there hadn't been since September, but who notices a missing Volvo stand unless you own one.

Wouldn't have mattered. A quick search of inventory turned up one in Orange County...

The Pleasanton Auto Mall folks are using the space for something much hotter than any brick: used cars.