Powering though: Kern auto dealers forced into tough choices in slow economy
| Saturday, Aug 29 2009 01:59 PM
Last Updated Saturday, Aug 29 2009 01:59 PM
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Casey Christie / The Californian Kyle Galaz, left, and Alex Lopez, Jim Burke Ford car salesmen, wait for customers at the Oak Street lot.
Casey Christie / The Californian The showroom at Jim Burke Ford on Oak Street has some fancy vehicles on sale including this nice pick-up in the foreground with the green ribbon on the hood.
Jenn Ireland / The Californian Robert Burke, used car reconditioning manager at Jim Burke Ford, pours a quart of sodium silicate into the engine of an '89 Chevy truck Thursday morning. "I feel more like a de-conditioning manager lately," Burke jokes. The Ford dealership has been putting down about a half a dozen cars a day since the 'Cash for Clunkers' program went into effect.
Felix Adamo / The Californian Ted Nicholas of Three-Way Chevrolet with some of the "clunkers" turned in for the cash for clunkers program.
Family Motors owner Jose Arredondo.
Right around Christmas, as construction on his new five-acre car lot on Bakersfield’s Auto Mall neared completion, José Arredondo had a dark night of the soul. There he was making a large investment at a time when other car dealers around town were cutting back everywhere they could — and his sales were nosediving.
He had two choices. “I’m already in the lake,” the owner of Family Motors Group of Cos. said. “So either I’m gonna swim to get to the other side, or you will find me here, dead but trying.”
Arredondo’s risk-taking may not be typical of Kern’s car dealers, but his theme of survival hits home for an industry that has undergone an almost unimaginable series of blows over the past year or so.
The wheels came off the U.S. economy, for starters. Credit departments were turning away many would-be buyers. And Detroit automakers only just dodged liquidation.
Through it all Kern’s auto dealers have managed to stay open by making profound changes, some of which were said to be overdue while others were made because there was no other way.
The ‘secret to life’
Managers and owners say the adjustments range from strictly financial considerations — cost-cutting beyond layoffs and pay cuts — to shifts in business culture, such as a sharper focus on customer service and more financially responsible deal-making.
Several dealers said they believe the worst of the downturn is over, and that consumer demand may be pent up. But there is no unanimity even locally that momentum built up by the Cash for Clunkers program will soon carry the industry back to a normal level of sales.
At the least, Kern’s car dealers say they have learned lessons they will not soon forget.
“Be flexible and understand that things can change on you,” said Dan Hay, president and general manager of Jim Burke Ford. “That’s the secret to life.”
Mo Hosseini, director of operations for a group of eight Bakersfield car dealerships, said dealerships that made it this far have showed they can survive under the toughest conditions.
“Out of all these things I think people (are) gonna come out leaner, meaner and better,” he said.
Added Arredondo: “We’re learning the heck out of these days.”
Inventory control
Cash for Clunkers has provided a sudden opportunity for dealerships to get a handle on their inventory, which for many dealers turned out to be a heavy burden at a time of shifting demand.
Dealers say they continue to have strong big truck sales, but that consumers are also looking for smaller vehicles, including SUVs.
The number of vehicles on lots may get smaller as well, Hay said. “We’ve all got to become better managers of our inventory,” he said.
Financial conservatism
Budgets have come under tremendous scrutiny, obviously. Before, that didn’t happen much, said the owner of Taft Chevrolet Buick Pontiac, Devinder Singh.
“If we made the dollar, we always spent $3,” he said.
Now, Hosseini said, supervisors must micro-manage.
“You look at everything,” he said, “from your coffee, your oil, your maintenance.”
And it’s not just new car dealers feeling the hit. Used car dealers have seen no bounty as consumers cut back.
Since spring began, Auto Shopper America has gone from four locations in Bakersfield to one.
For Auto Shopper as with other dealers, credit has become a big hurdle, finance and sales manager Sam Jamal said. He added that the owner is “thinking twice” before hiring anyone or buying more inventory.
Customer focus
One area several dealers said was due for improvement is customer service. Clearly personal attention figures into this. But so, too, does a greater recognition of customers’ need for value in tough economic times.
Jeff Millwee, owner of Shafter’s Richland Chevrolet Co., said that salesmen can no longer push buyers into vehicles they can’t afford.
“In the car business you used to see that a lot,” he said.
Ted Nicholas, president and CEO of Three-Way Chevrolet, said these days people want a Corvette but you put them in a Cobalt. It’s part of a sharper focus on the customer, he said, and it comes with more emphasis on training.
“When times were good we were order-takers...,” he said. “Now you actually have to sell.”
Looking forward
Locally, efforts have been made to share resources, in marketing especially, but also in the centralization around the Auto Mall and a now-abandoned proposal to combine used car lots.
Arredondo said he sees opportunities for local dealers to build on this spirit of cooperation.
“The economy is going to force us to get in line” as a community of dealers “... or we’re not going to be around.”
Randy Berlin, global director for Urban Science, an auto retail consulting firm based in Detroit, predicts that most dealers will pull through, although there may yet be changes brought on by restructuring in Detroit and new brands coming from China and India. His outlook remains positive, he said, because car dealers are smart business people.
“Dealers are extremely resilient, and I’m more and more amazed every day, impressed that they’re able to survive when it seemed like the entire world was against them,” he said. “They managed to hold their own, and the good dealers will continue to do that.”
