Auto Dealers Upbeat But Face Pressure As President’s Day Nears

by Categorized: Economy, Retail Date:

The region’s auto sales industry heads into the crucial President’s Day push with hopes of approaching an all-time sales record in 2014, but with pressures that are squeezing profits.

That was the assessment Monday by three industry executives in Connecticut and Massachusetts, who spoke with media outlets about the recession that wracked the auto industry and the recovery since.

Connecticut lost 17 percent of its dealerships, 16 percent of dealership employees and 34 percent of sales in just two years from 2007 to 2009, according to BlumShapiro, the West Hartford-based professional services firm that released a report Monday. That sales plummet was about the same as the nation’s 35 percent drop.

Courtesy of BlumShapiro

Courtesy of BlumShapiro

Nationwide new car and light truck sales reached a peak of 16.9 million in 2005 and fell to 16.1 million in 2007 before collapsing to 10.4 million in 2009, the report said. This year, sales are expected to top 16 million again for the first time in seven years.

Connecticut is also nearly fully recovered in sales, but hiring is not all the way back, said Chip Gengras of East Hartford-based Gengras Motor Cars, a multi-brand seller. “I’m excited about 2014, there are certainly a lot of challenges,” he said. “The low interest rate has been very helpful to us.”

Gengras has about $35 million in inventory at any given time and must pay interest charges on that, he said — so the rate not only affects sales, but costs as well.

And as for employees, each person in sales must move 15 percent to 20 percent more cars now than before the recession, to make the same money. That’s because profits on each car are tighter as a result of Internet databases, but online information also means buyers come in closer to a decision.

The comments echoed those made in November at the Connecticut International Auto Show by executives in the Connecticut Automotive Retailers Association.

Gengras and Warren Waugh, head of a family dealership group in Massachusetts, bemoaned automakers requiring them to upgrade showrooms at huge cost, sometimes even after recent renovations. A BMW showroom rebuilt in 2010 must now be done over again, Waugh said, “and it breaks my heart … it’s just never-ending.”

Also never-ending is the search for service technicians, who can make $45,000 to start and up to $60,000 after just three years. Right now, Gengras said, “We could use a half-dozen to 10 technicians.”

With the slump in new car sales a few years ago, used cars are harder to find, making them more expensive — a good trend for new car sales, said Rick Parmelee, a BlumShapiro partner who works with auto dealers. “The new car is incrementally not that much more expensive,” he said.

  2009  10.4 million
2010  11.6 million (11.1% increase)

  2011  12.7 million (10.2% increase)

  2012  14.4 million (13.4% increase)

  2013  15.3 million (7.6% increase)

  2014  16.5 million (projected)

  2015  17 million+ (projected)

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