Newspaper article The Christian Science Monitor

Car Dealers Struggle to Survive Sales Slump

Newspaper article The Christian Science Monitor

Car Dealers Struggle to Survive Sales Slump

Article excerpt

HARD times have come to the United States auto industry - and nowhere can the slump be felt more immediately than in the industry's front-line trenches, the nation's 24,000 new car dealerships.

As many as 1,200 new car dealers were forced to close their showroom doors last year, but industry experts say that figure could double in 1991 unless the war ends, the economy rebounds - and customers begin to buy cars again.

"Everyone's having trouble," complains Marcy Maguire, who along with her husband, Bob, owns Saturn and Chevrolet dealerships in southern New Jersey. While the Maguires expect to come through the current downturn, Mrs. Maguire admits it is taking a lot of effort. "For the first time in our history, we've had to cut employment. We have to look at every department to make them more productive."

The Maguires are by no means alone in worrying about the current new car sales slump. It was essentially the only topic of interest for the nearly 10,000 dealers who attended the annual National Automobile Dealers Association (NADA) convention held in Atlanta last month.

In previous recessions, some car brands fared better than others. In the early 1980s, Japanese nameplates were increasing market share while the Big Three watched their sales dry up. This time, however, imports and domestics are experiencing almost equal downturns. Dealers hope the end of the Gulf war will boost sales.

"All any of us can do is wait and see," said David Fischer, a Detroit dealer.

The big question is whether dealers can wait long enough.

Despite the ticket price of the average new car - about $14,000 - very little of that is actually going into a dealer's pocket. The typical pre-tax profit margin on new car sales was approximately 1 percent last year, according to NADA chief economist Thomas Webb. Vying for a tight pool of customers, dealers are cutting prices - and giving aggressive buyers whatever it takes to make a sale. …

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