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May. 16, 2009
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AUTO INDUSTRY WOES: Las Vegas escapes GM purge

1,124 dealerships to be terminated in U.S.

By JOHN G. EDWARDS
LAS VEGAS REVIEW-JOURNAL

Saab vehicles are shown for sale at a dealership in Pasadena, Calif., on Friday. A day after Chrysler moved to eliminate nearly 800 dealerships, General Motors Corp. told 1,124 dealers across the country their franchises will be terminated late next year.
Photo by The Associated Press



A flag flies over a General Motors dealership Friday in Willoughby Hills, Ohio.
Photo by The Associated Press

Southern Nevada's 15 General Motor dealers ended a white-knuckle wait for franchise termination notices Friday, and one key dealer believes they all escaped unscathed.

"My people have been at wit's end for two weeks," said Greg Heinrich, president of Fairway Chevrolet, Henderson Chevrolet and the Pahrump Valley Auto Plaza. Like workers at other dealerships, his employees feared they would lose their jobs, he said.

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    • "I woke up at 3:30 this morning," he said.

    "Our business is off considerably, but we're holding our own," Heinrich said.

    Sales are off about 60 percent, which is common in the new-car sector, he said. The company has cut hours and pay because of the sales slump.

    However, Heinrich, who is co-chair for the Chevrolet National Dealership Council, said none of his stores were notified of franchise termination. He said he believes that none of the GM new-car dealers in the area are being terminated, either, although he heard unconfirmed reports that GM will not renew the franchise for one dealer in Northern Nevada.

    Wayne Frediani, executive director of the Nevada Franchise Auto Dealers Association, said his information supported Heinrich's report.

    GM notified 1,124 dealers, or about 20 percent around the country, that it does not intend to renew their franchises in October 2010. There are 25 dealers in Nevada.

    Chrysler LLC disclosed the names of 789 terminated dealers, including four in Southern Nevada, on Thursday, but GM said it would not reveal the identity of dealers on its list.

    While Chrysler said it would not reconsider terminated dealers, GM will allow dealers to appeal the decision, according to Automotive News.

    GM on June 1 will send notices to 400 to 600 more dealers with borderline performance results, Heinrich said.

    For the first round, termination letters went mostly to small dealers with low sales volumes, analysts say.

    Findlay Chevrolet ranked No. 1 among GM dealership for retail sales in Nevada last year. General Manager Justin Findlay believed his dealership would avoid being cut but he couldn't be sure.

    "I do think it created some uncertainty within our work force," Findlay said.

    The cutback in GM and Chrysler dealerships is reverberating throughout the state's economy.

    "What it shows is that Northern Nevada and Southern Nevada are not immune to the difficulties being faced by the economy as a whole," said Bill Anderson, chief economist for the Nevada Department of Employment, Training & Rehabilitation.

    Anderson said his office expects to address the effect of dealer terminations on the economy in the monthly unemployment report next week. The state reported a 10.4 percent unemployment rate for March, higher than the national average and the highest in Nevada since 1983.

    New- and used-car sales are the second-largest source of sales taxes in the state, behind gaming, Frediani said. His organization represents 115 new-car dealers that employ 1,100 workers.

    The reduction of new-car dealers in Nevada will reduce city, county and state sales tax revenues, Frediani said.

    Sales taxes for automobiles, parts and service totaled $162 million in Southern Nevada in February, down 43 percent from a year ago, said John Restrepo, principal of Restrepo Consulting Group and vice chairman of Nevada's Economic Forum.

    Automobile, parts and service revenues have been declining for 16 months, Frediani said.

    The most immediate effects of dealership closings are on employees who lose jobs and suppliers and vendors who lose business sales, Restrepo said. For example, he said, some dealers subcontract for body shop work.

    Pat Clark Auto Showcase avoided the worst of the storm, said general manager David Pyles. It sold its franchises for Buick, Pontiac and GMC last July, he said. The dealer was selling more used cars than new cars anyway, he said.

    "Mr. Clark is looking like a pretty smart guy right now," he said. "We had no clue of what was coming."

    GM needs to reduce the size of its dealer network because it costs the automaker to provide support for dealers, said GM spokeswoman Susan Garontakos. GM incurs expenses through incentives, employee training, advertising and information technology.

    Frediani rejected her arguments.

    "There's no cost to (the automakers)," Frediani said. "It's (the dealer's) capital. It's his business. It's his employees. Why would you give a damn how (the dealer) does as long as he buys your product and services your customer."

    Eliminating dealers, many of them family-run businesses, "will do nothing" to correct financial problems at Chrysler and GM, he said. "It's pretty sad and pretty disappointing."

    Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.

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    DM wrote on May 29, 2009 10:55 AM: Long time coming. I can't say never but I have no intentions of buying an american car again EVER! My wifes 2006 CTS has needed front brakes 3 times and the car has under 30k. Findlay Cadillac in Henderson is possibly the worst sevice center I have ever been to. Lame unintelligent service writers, who straight up don't care. 2 front tires, Rear brake job and front alignment $1200.00 ARE U KIDDING ME? See ya Cadillac never again! Just bought a Audi A4 right next door to Cadillac, still a Findlay group, but totally different experience for the BETTER.


    DMCVegas wrote on May 16, 2009 01:21 PM: Folks, this is only Round 1. GM's ultimate goal is to slash 40% of it's US Dealer Network. Friday's announcements are only 20% of the ultimate goal. Within the next several months, GM will slash more dealers. I would expect to see some Vegas dealerships to get axed then.

    Honestly though, I've got to applaud GM and Chrysler. While the UAW certainly shares the blame for the destruction of customer loyalty, the Dealer Network has pretty much been the biggest reason that Americans don't buy American cars any more. Sleazy tactics, rude behaviour, horrible mechanics. Proof of that was when Saturn first debuted. They forced low-pressure sales, and ended up with a strong loyalty that any other car brand would have rivaled.

    If car manufacturers could set up a system where I could get pre-approved either over the internet, or even at a kiosk in one of their dealerships, I'd gladly pay the full MSRP and chock the rest of the profit directly to the manufacturer. If nothing else, so that I don't have to deal with sleazy sales people.

    For anyone that's never read it, this is a primer that everyone should read before setting foot on any car lot.

    http://www.edmunds.com/advice/buying/articles/42962/article.html


    Mark wrote on May 16, 2009 10:24 AM: I would never buy an Affirmative Action-built US car.


    Car Guy wrote on May 16, 2009 08:51 AM: "Mr. Clark is looking like a pretty smart guy right now," he said. "We had no clue of what was coming."

    Are you kidding me? His store was losing hundreds of thousands of dollars a month, was the worst of the worst in CSI for years, he got out only because his business was in the tank, nothing more. If had got out 6 years ago, I'd say that would have been smart.


    James wrote on May 16, 2009 08:48 AM: A big mistake by GM to let some of these local GM dealerships survive. This town has been over-dealered for 10 years. The following stores should have been axed: Desert Buick, Fairway Chevy, Cadillac East, Pahrump Chevy, Centennial Buick. GM missed the boat there, but that is not surprising because they are so badly mismanaged, it's sickening. I will never buy an American car again.


    Randy wrote on May 16, 2009 08:32 AM: The only reason why we have car dealers in Nevada is because the Nevada state legislature required it by law.

    This is an invasion of the free market by government intrusion. Why can't we buy direct from factory, or from a Wal-Mart, K-Mart, Target, or Best Buy. Why not allow anyone to sell cars?

    The state limits it to car dealers to create a cartel arrangement allowing them to boost prices.


    ...Temujin...Khan..of..the..Yakka..Mongols... wrote on May 16, 2009 05:04 AM: .
    ..
    ...It's scary out there.. We may have kept the dealerships , good, A dozen GM dealerships here in town is a lot of jobs. I remember in college, in the sixties, Economics teachers preached, "As steel goes, So goes the nation". The auto business was a big component of the steel business..

    ...Auto sales were down, Mills reduced production. Payrolls were cut back. Smaller paychecks meant less cars, washing machines and refrigerators were sold.. This is how an economy contracts..

    ... We've been preaching "Buy American" for four decades and now it is hitting us right in the face. The Japanese in the eighties taught Detroit to start making better cars and they did.

    ...This was a result of Malcolm Baldridge the "Father of Quality Control". He found an audience of Japanese business in the sixties and seventies and America ignored him..
    No one wanted to buy a "Monday" car made in America. Detroit caught on in the eighties and brought a better product off the line..

    ...Here in Las Vegas, General Motors reduced an annual Convention from a 600 to 400 Chain motor show last fall at the Sands Convention Center. That's a big show cut back for stagehands and hospitality workers on the eleventh hour..

    ...State Farm cancelled their five year show at the Thomas and Mack that's 11,000 Hotel rooms and lots of dinners and entertainment all around town..

    ...Teamsters, bartenders, Stagehands, cab drivers, waiters, dancers and a lot of other hospitality folks sure are feeling the pinch. It may be a while before we trade in the old clunker for a new car, Brothers and Sisters..

    ...Let us pray the auto industry doesn't follow the steel business down the tubes because there are a lot of Detroit dollars circulating in Las Vegas during the good years..

    ---------The Great Khan has spoken-----