Car dealers close as Ford, GM, Chrysler keep cutting

Car dealers close as Ford, GM, Chrysler keep cutting http://www.usatoday.com/money/autos/2008-01-02-closing-dealerships_N.htm
NORWALK, Calif. Instead of the stampede to inquire about year-end
clearance sales, customers have been calling Ford dealer Norman Stutzke lately to offer condolences.
Stutzke shut down Keystone Ford this week after 39 years, one of hundreds of dealerships that face the ax around the country as Detroit's automakers downsize their retail operations.
In its glory days a decade ago, Keystone sold more than 3,000 new and used cars a year and drew crowds to watch the shooting of a live variety, Spanish-language, TV infomercial on the lot every week.
Now, with sales having fallen by about two-thirds and three years of losses, Keystone's demise as a Ford dealer leaves more than 100 employees wondering about their future, costs this city a valued component of its tax base and dashes Stutzke's dream of passing on the business to his son.
Having shuttered factories and eliminated hundreds of thousands of automaking jobs, Ford Motor (F), General Motors (GM) and Chrysler are now turning their attention to weeding out weaker dealers in bigger metro markets. They make fewer vehicles, so they don't need as many places to sell them.
Keystone was neither one of the biggest nor most prominent dealers. But it is one of the many that are disappearing. GM has reduced its dealerships by 229 to 6,807 in the past year; Ford had shrunk by 139 to fewer than 4,140 as of July; and Chrysler had eliminated 142 to 3,607 as of October.
Auto dealerships are almost always privately owned, either by big chains or individual families such as Stutzke's. Automakers are forced to argue, pay off or otherwise persuade the feeble ones to give in.
Rolling with the punches
Dealers hitch their fortunes to the auto brands they sell. If an automaker cranks out unpopular cars, faces new competition or makes bad financial choices, dealers' sales plunge. Auto manufacturing is a cyclical business with sometimes deep lows and recoveries, and dealers are expected to roll with the punches.
Automakers complain that when they have too many dealers, sales can become so infrequent that an owner can't afford to reinvest in the dealership. The brand suffers when potential buyers see antiquated, cramped or poorly maintained showrooms while competitors sell from big, bright modern facilities.
For a long time, "The strategy was to have a dealership on every corner in order to drive market share," says Ford spokesman Jim Cain. Today, "The business model is very different."
While he wouldn't discuss Keystone directly, Cain says the Los Angeles area has too many dealers, forcing painful reductions.
"This is probably the right thing to do," Cain says. "But it doesn't make it any easier."
Some savvy dealership groups are taking advantage of the reductions, buying up competitors or enlarging their empires in ways that make them more profitable and responsive to customers.
In Fort Lauderdale, AutoNation, the country's largest dealer network, bought out a long-established Pontiac-Buick-GMC-Saturn dealership in the past year and moved those brands to the same site as its Chevrolet dealership. The selling dealer made money, and the consolidation of back-office functions will make the new group more profitable, says AutoNation President Michael Maroone.
"I see it as an opportunity a win-win," Maroone says. The consolidation "is long overdue."
But that's little consolation to individual dealers or to their communities.
Community impact
Each dealer that's lost can be a blow to its community. Auto dealerships are often among the most important businesses in a town, the biggest advertisers and community boosters, whether it's sponsoring Little League teams or the Rotary Club.
"There isn't a day that goes by that a car dealer isn't getting a call asking for a donation," says Dale Willey, a GM dealer in Lawrence, Kan., and chairman of the National Automobile Dealers Association.
"It's heartbreaking when a dealer that's committed to customer satisfaction and committed so much of their life to the business for decades decides to quit," says Annette Sykora, who runs dealerships in Slaton and Levelland, Texas, and who has been tapped as the NADA's next chairman.
As dealers go, Keystone's showroom speaks to its reputation. Hanging above a sparkling new Shelby Mustang is a ring of gold flags denoting the years 2000 to 2005, when the dealership won the coveted Ford President's Award for superb customer service.
Though his facilities were fresh and up-to-date only about 10 years old Stutzke says the problem is competition: eight Ford dealerships in a 10-mile radius. And that doesn't include other brands that are expanding, such as a new CarMax used car lot nearby that he says has four times his inventory.
Stutzke isn't bitter. He loves Ford's product line. But he faults the automaker's management for poor decisions a few years ago.
"It's not that the product they have isn't good. They haven't responded to the public's needs fast enough. They haven't had the small cars and niche products that people want, at least in California," Stutzke says.
It's a sad end to a dealership into which Stutzke, a big man who wears suspenders and worked from a simple office above the showroom, basically poured his life. At 75, he plans to retire.
Stutzke came to Keystone as business manager in 1970 after having worked for Ford at its headquarters in Dearborn, Mich. He saw the business logic to Norwalk from the start: A business license cost $3,000 a year, compared with $30,000 in Los Angeles a few miles away.
At that time, the dealership was 2 years old, and Norwalk was thriving. Not only was Ford's Pico Rivera assembly plant nearby, but the little suburb southwest of Los Angeles was also near the aerospace plant that built the space shuttle.
He became general manager and, by 1977, he bought out the dealership's two founders to become owner. He moved the dealership to its present 6-acre location in 1993.
All the while, Norwalk and southeast Los Angeles gradually became more Latino 63% in the most recent Census data. Stutzke says he adapted, becoming among the first car dealers to advertise on Spanish-language television. Families poured into the dealership on Saturdays to watch the making of El Show de Keystone Ford.
Latinos became great customers, buying three out of four vehicles, he says. But average income in Norwalk remains low by L.A. standards, at $46,047, hurting the ability of customers to afford more expensive, and more profitable, new models.
Yet, as recently as 2000, Keystone was a success. Not only did Stutzke run the big dealership, he also poured $4.5 million into a separate 12-bay service center up the street, part of a chain that Ford was establishing to service all makes and models. Stutzke says he was left hanging when Ford abandoned its original concept.
At its height, Keystone employed 160. Some are like technician Larry Bedley, who worked there 23 years. He was good enough that Ford staff would visit him for tips on solving especially difficult repair problems.
Instead of leaving for another job after the closing was announced, Bedley decided to stay until this week. "They've been good to me all these years. I didn't want to leave them out in the cold," he says.
Some parts of Keystone still open
Though the Ford sales and service departments have closed, and Keystone has ceased as a Ford dealer, the rental-car business and body shop are still open and the remaining used car inventory will be sold off.
With a mostly blue-collar clientele, Keystone thrived on an inventory heavy on pickups and SUVs. Then, in a post-9/11 world, trucks started falling out of favor, gas prices climbed, and buyers continued to favor import brands such as Toyota and Honda for perceived reliability, Stutzke says.
As losses started piling up, Stutzke tried to sell Keystone Ford a year ago, to no avail. He says other dealers told him they were in the same bind, just too much competition. When Ford came in with an offer to quit again, he won't say how much he grabbed it.
The closure is a blow to Stutzke's dream of turning the dealership over someday to son Paul, who has worked with him for 18 years.
Paul, 42, pretty much grew up around Keystone. "I used to come in with him on the weekend when I was 12 and 13 and help clean up the lot," Paul says. "I was always going to be a Ford dealer." Now, he will oversee the dwindling operations; then he's not sure what he will do.
The closure of the dealership won't be easy on Norwalk, population 109,681. It's one of only a handful of new car dealerships that contribute to its tax base.
"We're sad to see he wants to leave, but we understand his economic (situation) comes first," says Mayor Rick Ramirez. He says the city plans to work with the Stutzkes on what comes next for the valuable real estate.
Even as the closing loomed, Norman Stutzke kept his six-days-a-week work schedule. Many of the calls he took were from valued customers phoning to hear the bad news from the owner himself.
One was an aerospace worker who had bought a car seven years earlier and had stayed in touch with the dealership. He had heard the rumors.
Yes, Stutzke told him, business was "very quiet," and he was, indeed, shutting the doors.
"Sign of the times," he called it.
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Civis Romanus Sum

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With dealer fees and added charges they need to go out of business. Add to that the over priced cost and it is bound to happen. You can't work at wal-mart and buy a $50,000 truck. Looks like a good time for more chinese imports that is so good for the american economy... : (

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