Feeling pinch, car dealers not driven to despair - yet

March 05, 1991|By Lorraine Mirabella | Lorraine Mirabella,Sun Staff

Times are tough in Chrome City. But the folks who sell cars on auto alley, the three-mile stretch of Ritchie Highway in Glen Burnie, are a resilient lot.

Their livelihoods can rise and fall on a fickle economy, gas crunches, recessions, soaring in-terest rates and labor discord among auto workers.

The men and women who work a dozen lots along the well established strip say the years have taught them this: Bad times inevitably follow good.

After several boom years, some longtime auto dealers say they've never seen times as hard as now. The U.S. auto industry has emerged from its worst year since 1983; locally, sales dropped by as -much as a third in the last quarter. Judging from the first weeks of 1991, dealers say, things will get worse before they get better.

"This is the worst I've seen." said Gary Hurley, a Baltimore car dealer and immediate past president of the Maryland New Car and Truck Dealers Association. "Many people are afraid for the future. People are uncertain about their jobs. They're uncertain about their ability to pay. When people get uncertain, they don't react."

Unlike downturns in previous years, several factors combined to fuel 1990's drop in sales. Fear of war, greater numbers of automakers, looser restrictions on imports and a greater number of consumers who owe more on their car than its, depredated value threaten to keep the market down this year, too, dealers say.

War hasn't helped.

After the first U.S. warplanes stormed into Iraq Jan. 16, customers all but disappeared from the showroom at J. B. A. Chevrolet in Glen Burnie. And though owner Joe Aiello knew potential customers sat huddled around their televisions, he pulled his ads from the three-network stations. Not until two weeks later, when customers started trickling back in, did he resume advertising.

"It didn't seem like the thing to do, to be advertising during that time," he says,

In a region including the Ba1timore metropolitan area and much of the Northeast section of the county, sales of new cars and trucks dipped 15 percent to 17 percent during the last three months of 1990, the latest Auto-motive News reports say. Last year's total sales fell about 10 percent from the year before, the trade journal says.

Local dealers have also seen de-clines of 10 percent from 1989 to 1990, but much steeper declines in the last four month of 1990.

"The year was holding its own up through and including September," said Joseph A. Levy, president of Admiral Pontiac and Mazda in Glen Burnie. "Then the last quarter, especially November and December, was probably down 30 percent."

Nationally, total sales of cars and light trucks during 1990 fell to 13.8 million vehicles, off 5.1 percent from 1989. Industry experts consider that a disaster because the number climbed only slightly from the number sold in 1983, when the United States had six major automakers and placed sharp restrictions on Japanese imports.

Now, 10 major companies build cars and trucks in the United States while seven Japanese companies can turn out 2 million cars and trucks at U.S. factories.

Today's consumers have an estimated 364 models to choose from, more than double the number offered 10 years ago, said Bob Bell, chairman of the board of Bob Bell Ford in Glen Burnie.

"Even if things were the same (as during the 1981 downturn), there are more people eating off the pie," Bell said.

He also noted that the 60 month financing packages that became prevalent several years ago have left many car owners with auto loan balances that exceed their car's depreciated value.

"We were due for a downturn, but it's more severe because of those things." said Bell, owner of one of the state's largest dealerships. "The desire to own a new car has not changed. We look at many deals, and many people want to buy a new vehicle, but they can't."

As many retailers have done to compensate for the weak market, dealers have responded by cutting expenses rather than slashing prices. That means restricting inventory, reducing advertising and, in some cases, laying off salespeople.

Dealers fear that if the recession deepens, even the service and repair departments that usually carry dealers through bad times will suffer.

"A lot of people who take planned maintenance and follow that religiously are not doing it." Hurley says. "They're waiting until something happens. When they have fender-benders, they get a payment from the insurance company and are spending it on other things."

So far, the service business at Admiral Pontiac and Mazda has risen in proportion to the decrease - in sales, about 10 percent, said Levy.

Levy said he believes dealers in Glen Burnie and the Baltimore region will be able to survive the downturn. So far, no county dealerships have been forced out of business.

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