With shoppers flocking back to showrooms, auto dealers are making money again and have begun sprucing up reception areas and hiring back workers.
Some big auto dealerships are even spending millions of dollars snapping up independent dealers and smaller chains — a sign of renewed confidence in the industry, analysts said.
“We are seeing some daylight in the automotive business,” said Dan Turner, general manager of Power Ford in Torrance, Calif. “It is starting to become an exciting time again.”
That has translated into thousands of new jobs. AutoNation Inc., which owns Power Ford, has hired 109 workers at its 45 dealerships in California this year, bringing its head count to 3,155 in the state.
Ruben Gonzalez lost his job at an Office Depot store at the start of the year but found new employment last month as a service advisor at Power Ford.
“It is really good to be back in the workforce,” said Gonzalez, who lives in Los Angeles with his wife and two children. “As a parent, I really wanted to prevent our young sons to see that Dad was in despair. I was the person bringing home the bacon in my household, and I wasn’t.”
The auto business is rebuilding from a historic downturn during which both General Motors Co. and Chrysler Group underwent government bailouts and bankruptcy restructurings while they and other manufacturers suffered from plunging sales.
Dealers were caught in the freefall.
GM and Chrysler closed hundreds of dealerships as part of their bankruptcy reorganizations. Franchises selling other auto brands also closed. Since 2008, the number of U.S. auto dealers has plunged 15 percent to 17,680, according to the National Automobile Dealers Association.
Auto dealership employment dropped 15 percent to 892,100 during the same period.
Now, rising car sales are helping the surviving dealers recover.
In the first three months of this year, Americans bought more than 3 million vehicles, a 20 percent increase from a year earlier and the equivalent of a seasonally adjusted annual pace of more than 13 million. That compares with annual sales of just 10.4 million in the depths of the downturn back in 2009, the worst for auto sales since 1970.
Even California, which “was one of the first markets to decline,” is having a recovery in auto sales, said Mike Jackson, chief executive of AutoNation, which owns 210 dealerships in 15 states.
Independent owners also are adding employees so they can handle more customers. Some dealers were so short on staff, it was taking them more than five hours to negotiate a deal and deliver the car, said Chris Sutton, senior director of J.D. Power and Associates’ automotive retail practice.
“When they get busy, they don’t have enough people to staff the floor and the finance department,” he said. “It’s not to the dealer’s benefit to see people sitting around and waiting.”
Some dealers say they’re now more profitable because they cut back during the lean years.
“Back when we went through Armageddon, we had 850 employees and eight stores. I now have four stores and 450 employees, and we are going to make more money than we ever did,” said Mike Bowsher, who owns Chevrolet and Buick dealerships in Atlanta; Nashville, Tenn.; and Orlando, Fla.
Still, he has needed to hire about 30 workers in recent months and will probably add more if sales continue to grow.
Bowsher also is able to plow more money back into his showrooms.
“We are building a new Buick GMC building in Orlando for $1 million and doing a Chevrolet upgrade for another $250,000,” he said.
He’s spending money to upgrade showroom furniture, redo carpets and paint. “It’s all the stuff we couldn’t afford to do. We are now able to invest in our facilities again. Honestly, it is overdue,” Bowsher said.
Car dealers have become profitable again because during the slump, “so many were pushed out of the business either by their own volition or by the manufacturers,” said Jeremy Anwyl, CEO of auto information company Edmunds.com. The pickup in sales volume is spread across fewer franchises, he said.
In anticipation of a brisk auto market, AutoNation is just completing an $18 million reshuffling of its dealerships along half a mile of Pacific Coast Highway in Torrance. The company is upgrading its dealerships, especially to boost Mercedes sales in this affluent neighborhood that borders the Palos Verdes Peninsula.
AutoNation moved Power Ford to a nearby Jaguar store that it had closed. Then the company’s Mercedes-Benz of South Bay moved into the old site of the Ford dealership, where it built an expansive new Mercedes showroom, refurbished the service bays and cleared room to double the size of the inventory it can keep on the lot. AutoNation’s Infiniti store is moving to a larger, rebuilt facility where the Mercedes dealership used to be.
Just a few miles away in Hawthorne, AutoNation just finished building one of the first stand-alone Fiat dealerships in the nation on the site of the company’s old Buick-GMC franchise, which General Motors closed during the automaker’s restructuring.
The company spent an additional $2.4 million rebuilding an Audi franchise on Highway 1 in Newport Beach.
“These type of investments allow us to be well-positioned as the auto recovery picks up,” Jackson said.
Source: McClatchy-Tribune Information Services.