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LOCAL IMPACT OF AUTOMOBILE MANUFACTURER BANKRUPTCY OR BAILOUT STILL UNCERTAIN

By Ezra Mann/OF THE COMMERCIAL STAFF
Friday, November 28, 2008 12:05 AM CST

Uncertainty about the stability of the automobile industry has many concerned with the ripple that could follow if General Motors, Ford or Chrysler go bankrupt and don’t receive a bailout.

The biggest risk a dealership faces is that if one of the big three declares bankruptcy, consumers will be less likely to buy from dealerships associated with the manufacturer, said Henry Ford Trotter III of Trotter Ford Lincoln Mercury.

“People are certainly more mileage-conscious even with fuel prices lower,” said Trotter. “A bankruptcy even by another manufacturer would shake the industry and this is why a bailout is desperately needed.”

Local sales at Trotter are down 8 percent for the year, though other areas of the nation have been much harder hit and the hope is that sales will pick back up in 2009, Trotter said. Consumers in Southeast Arkansas are now buying more practical cars and are looking to remove extra features instead of requesting additions.

Roger Smart Sr. of Smart Motors said that he did not feel comfortable going into detail about the bailout/bankruptcy issue, though he did say he does not expect a bankruptcy will happen. He noted that GM sales should come back strong in time.

Some used car lots have actually seen sales improve with the tough economic times, including Car Mart which has witnessed a 20 percent increase in sales in the recent quarter, said Dishaun Bell, general manager.

The dealership also has seen increases in sales of trucks and sport utility vehicles doing well because of the market being flooded with trade-ins.

“It makes sense because the bigger vehicles are now more plenti ful and at a lower price, which brings in the thrifty customer,” Bell said. “Unfortunately, when the big auto makers aren’t doing well we see more people come in.”

Other used car owners are hurting.

Danny Cochran of Cochran Motors & Powersports said that the current quarter is the worst of the year with many customers not able to get the necessary financing from lenders.

“We’ve seen a 35 to 40 percent decrease from last quarter and I could sell 40 percent more if lenders were lending,” Cochran said. “It’s not the buyers being afraid to buy as it is the lenders not being able to lend.”

The auto parts business is seeing mixed results, with motorists still needing replacement parts, but buying fewer higher quality brands in favor of entry level product, said Mark Merz, external reporting and investor relations manager for O’Reilly Auto Parts.

Comparable source sales are up for the year as a result of consumers holding onto older vehicles. Many dealerships also buy parts and sales overall are below historical averages.

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