While the whole economy battles the recession, the auto industry seems to have been hit particularly hard. The biggest headlines have involved Detroit's Big Three, the bailout "bridge loans" that they managed to acquire, and plummeting sales. Indeed, sales are proving dismal for just about every major automaker worldwide.
While it's not often been above the fold, the truth is that every negative impact on one of the major automakers worldwide -- domestic or international -- has a major impact on the dealerships or franchises that sell the vehicles.
Case in point, domestic automakers have been trying to reduce their dealers networks, a cost-cutting move reflecting the glut of dealers in the market today.
The National Automobile Dealers Association has reported that 900 of the total 19,700 new car dealerships in the U.S. closed last year. A resulting, 50,000 jobs went with them.
Hispanic Business had an opportunity to talk to four Hispanic dealership owners to see how they are faring. Their examples illustrate many of the difficulties that dealerships nationwide are experiencing.
Luis Alaniz, Aztec Chevrolet, Buick and Pontiac, Beeville, Texas
Luis Alaniz opened Aztec in May 2007. He employs 38 people. He said that sales in 2007 and the first six months of 2008 were "good." Sales by month first averaged about 115 vehicles, then 105 and now it is down to 65 vehicles, about a 40 percent drop. He volunteered that although residual values of SUVs plummeted due to the rise of gasoline prices, he did not experience a drop in sales of SUVs or pickup trucks. He explained that is due to the area where he sells his vehicles, a region that includes a lot of farms and ranches and a little bit of oil business. People in these industries tend to buy trucks out of necessity.
Alaniz found that many of his customers were holding back from buying a car last December, when General Motors was claiming it may not make it through the rest of the year.
"I had a customer who was going to buy three Chevy Cobalts for his pharmacy business," said Alaniz. "But he held back in December because of all the talk of GM going bankrupt. When GM got its loan, he came back and bought the cars."
He uses GMAC as the primary lending source for his customers. Recently GMAC has demanded that lenders have a FICA credit score of 700 in order to be approved for a loan. As a result, Alaniz said that he has lost 80 percent of the customer base. Prior to the more restrictive loan practices of GMAC, Alaniz was also using local banks and credit unions to finance his customers. He is using them much more often now. But he is finding it difficult even dealing with the local banks.
"A lot of the local banks don't do car loans unless you are a real good customer," he said. He added that 10 percent to 15 percent of loans he gets for buyers are coming from credit unions.
There was a time when leasing cars was a positive way to get new customers to buy. That is no longer the case. However, Alaniz noted that leasing is not a good alternative for people who live in rural regions like the area in which he has his dealership.
Further complicating the course of businesses were the incentives offered by domestic automakers to combat dismal sales. Generally, GM would reimburse its dealers for the incentive about one week after a car was sold. But as things got tough in December, the automaker took as long as three weeks to pay. Alaniz complained that November and December were heavy months for incentives and, since GM paid late, he found himself falling behind. However, ever since GM got its loan money, Alaniz reports that the company has been good about reimbursements, which are again coming in weekly .
