Auto dealer Louis J. Roberti on the lot of his Arroway Chevrolet Saab Hummer business in Katonah.
Katonah auto dealer Louis J. Roberti has changed his morning workout routine to tune out the times.
“You get up in the morning, you turn on the TV, you want to kill yourself,” Roberti, who grew up in the industry as the son of an executive at Curry Automotive in Scarsdale, said recently in his office off the showroom floor at Arroway Chevrolet Saab Hummer.
He smiled despite the daily dire news about the economy and continued uncertainty about the future of the automaker, General Motors Corp., whose car and truck brands he sells. Roberti now listens to music rather than watch TV from his exercise machine.
Though his dealership lot on Bedford Road is packed with stickered vehicles, “Our inventory is probably down 35 percent off last year.” He has moved vehicles from three other lots he keeps in the area to save on costs.
Roberti said 2008 sales at his business were up 20 percent in the first six months of the year, but plunged dramatically in the second half, with sales for the year ending almost 50 percent less than in 2007.
The sales dearth carried into the new year. The dealer said he paid $80,000 in sales taxes to the county and state in January. In normal times, his sales tax payments are $190,000 a month.
That loss of tax revenue from local auto dealers “is going to trickle down to the schools, to the state government, to everything ”“ to jobs,” he said. The dealer himself has managed to retain most of his work force through the deep slump, laying off two of 37 employees.
In 2009, “Our sales are down 50 percent from one year ago,” he said. “We”™ve had a little bit of an uptick in February.”
That February uptick was nationwide for the franchise owner”™s parent company, GM, which last week reported U.S. car sales for the month were up nearly 23 percent compared with January. Overall, however, the news remained grim for the automaker.
Dealer deliveries last month were down 53 percent from a year ago, as fleet sales to businesses and governments declined 75 percent. GM reported retail sales last month were down 43 percent from a year ago in an industrywide February market said to be the weakest since 1967. Total GM car sales were down 50 percent and total truck sales declined 55 percent from February last year.
Industry analysts said February marked the 15th consecutive month of sales declines for the U.S. auto market. “Everybody is varying degrees of down,” Roberti said.
Leasing cut back
At Smith-Cairns Ford Lincoln Mercury in Yonkers, “February shapes up to be a rough month, rougher than all the others,” said Dwight W. McGuirk, president of Smith-Cairns Inc. Overall car and truck sales for the month were down about 30 percent from a year ago. “That will start to level off” as sales pick up from May through August, he said.
At Mercedes-Benz of White Plains, “January was a tough month” after a 2008 fourth quarter in which sales were down about 25 percent, said Joseph Pepe, president of Pepe Motors Corp., owner of four luxury-car dealerships employing about 230 people in White Plains and Larchmont.
“Wall Street was so impacted and we do a lot of business with Wall Street people,” Pepe said. “That business has probably impacted dealers in the metropolitan area for luxury cars more than anything else.”
Compared with January, “February has been up,” the Mercedes dealer said. From Feb. 21 through Feb. 28, Pepe Motors sold 70 luxury autos in White Plains. “I think people are starting to feel a little bit comfortable with the situation they”™re in and there”™s a lot of pent-up demand,” he said.
Pepe said sales of pre-owned autos have picked up somewhat in the economic crisis. And parts and service department sales in 2008 were up from 2007 as owners hold on to their luxury rides for longer than the usual three-year cycle.
For retail customers, “There are a lot of great deals out there right now,” Roberti said in Katonah. “But we”™re hurt by the lack of leasing,” which GM and Ford Motor Co. in 2008 greatly cut back for their vehicle brands and Chrysler L.L.C. eliminated. “That”™s hurt us tremendously.”
“That”™s hurting us in the metropolitan area,” McGuirk in Yonkers said of the leasing cutbacks by Detroit”™s Big 3 automakers. Leasing accounts for a large share of the metropolitan New York auto market. In White Plains, the Pepe family is catching some of those other dealers”™ lost trade in leasing, which represents about half of their luxury-car business.
Unlike loans for new cars that can be bundled and sold as securities by lenders, “It”™s very difficult to securitize a lease” because of investors”™ doubts about customers”™ creditworthiness and price values of vehicles at the end of lease terms, McGuirk said. In step with automakers”™ moves, banks have tightened their credit for leased vehicles. “It”™s the easy-money routine that”™s kind of dried up in the last six to seven months,” he said.
No quick turnaround
In Katonah, Roberti has especially felt the impact of GM”™s retreat from leasing in his Saab business, the Swedish-made auto that he has sold since 1981. The dealer used to sell 28 Saabs a month; he now is selling four a month.
“The first bullet that shot into it was leasing,” he said. When GM stopped leasing Saab autos last May, the dealer lost what made up 80 percent of his Saab sales.
The most recent hit to his business came in late February, when GM filed for bankruptcy protection in Sweden for its Saab subsidiary, which the automaker has said it wants to sell by the end of this year. “It was a maneuver to get the Swedish government to loan some money to Saab itself,” said Roberti, whose Saab inventory is down to 40.
Entering March, Roberti had 18 Hummers in his inventory, a brand that “has been selling very nicely” since last spring”™s consumer panic over high gas prices has died down. GM is fairly close to a deal for the sale of its Hummer division, said Roberti, who drives one. “They”™ve had considerable interest in the brand. It”™s a worldwide brand,” he said.
Roberti said the biggest problem for auto dealers is finding floor plan or inventory financing in the credit crunch. “The banks used to be in the floor plan business and many banks have gotten out of it,” he said. “You”™re limited as far as where you can go.” In the tight credit market, “They dictate (loan terms) to you rather than you dictate to them.”
“You can”™t stay in business without a floor plan source,” McGuirk said.
Unlike GMAC, the auto financing source formerly owned by General Motors, Ford Motor Credit still is owned by Ford, he noted, an advantage for the automaker”™s dealers. But Ford”™s credit company might drop Mazda dealers, a move that would affect McGuirk”™s Mazda by Smith-Cairns dealership in Yonkers. Increasingly, “A lot of these guys are sticking to their own brand” in floor-plan financing, he said.
For auto dealers seeking lenders, “That used to be a gravy thing. They used to chase me for floor plan. You call a bank now and ask them for a floor plan and they don”™t want to return your call.”
“The number-one problem that we”™re all facing basically is credit, whether it”™s floor plan or getting your customers financed,” McGuirk said.
Roberti said GMAC remains his floor-plan lender “even though their rates are high.” The GM dealer, who used to borrow for his inventory at a half-point under the prime rate, now pays 2 points over prime, or 6 percent. “That”™s very high,” he said. It is costing him about $20,000 a month in additional interest.
Roberti sees a certain irony in GM”™s urgent need for life support from the federal government. “We have the best product we”™ve ever had,” he said. “I”™ve been in this business since the mid-”™70s, so I”™ve been through the sloppy years and the years they didn”™t do a good job. These cars and trucks are like world-class.”
For the Big 3, “I think it”™s going to be a rough year for them,” said Roberti. “I don”™t think anyone”™s going to turn it around this year.”
Industry analysts agree. After a year in which vehicle sales in the United States closed at 13.2 million, the lowest level since 1992, they predict sales this year could drop to the 10-million to 11-million range. J.D. Power and Associates, where analysts believe the auto market will have hit its bottom this month or in February, recently revised its total new light-vehicle sales forecast for 2009 to 10.4 million units from the previous forecast of 11.4 million units.
“I think they”™ve got to survive,” Roberti said of General Motors. “I think the government has got to help them.” The reality, he said, is that 18 to 20 percent of U.S. workers”™ jobs are in auto industry-related businesses. “If they let GM tumble, this country is really going to be in a mess.”
Ford could be imperiled too if General Motors goes bankrupt, said McGuirk. It would have a ripple effect through the industry, forcing automotive suppliers to close on which Ford too depends.
“I”™ve been doing this for 32 years,” McGuirk said. “I”™ve never seen anything completely fall out of the sky like this has.”
