Deep Freeze for Dealership Deals
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20090914-NEWS--0001-NAT-CCI-AN_-- 9/11/2009 5:11 PM Page 1 autonews.com ® SEPTEMBER 14, 2009 $159/YEAR; $5/COPY Entire contents © 2009 Crain Communications Inc. All rights reserved. Deep freeze for dealership deals Stores are dirt-cheap, they begin to recover. ble whammy because both key num- gest a selling price. “The market for dealerships has bers in the dealership-value equation Desirable dealerships in metropoli- but credit crunch been turned on its head,” says Phil have tanked. tan markets that would have fetched has killed the market Vogel, a dealership broker in San Ⅲ Dealership profits are down more than six times net pretax earn- Francisco. sharply or are nonexistent. ings even a year ago would command Donna Harris The value of Detroit 3 dealerships Ⅲ The multiplier that measures so- just three times net pretax earnings [email protected] has been sinking for two years. Now called blue sky — intangibles such as today, not counting the real estate Whitacre’s way: The credit crisis has popped the even some premium import-brand good customer relations, a strong and equipment. franchise bubble, slashing dealership dealerships are worth less than half brand and a prime location — has Even if they were shopping for prices to levels not seen since the of what they were a year ago, accord- plunged, too, with some brands be- stores, most dealers lack the credit High profile mid-1990s, before dealers started go- ing to investment bankers who spe- ing hurt far worse than others. The lines to finance acquisitions. Dealer- ing public. cialize in car dealership transactions. multiplier traditionally has been for GM chairman And prices may sink further before Dealers who want to sell face a dou- teamed with store earnings to sug- see STORES, Page 30 Whether he’s appearing in a TV commercial or talking with employees, new General Motors Dealer margins soared ➤ 30 Chairman Ed Whitacre is taking Post-clunker a very public role. | PAGE 3 | paralysis hits Hidden in plain sight showrooms Honda put a top-secret advanced Jesse Snyder [email protected] design studio amid The showroom misery after cash for clunkers was every bit as bad as a heavily dealers and automakers had feared. trafficked stretch Maybe worse. of retail storefronts in the “It was as still as a graveyard,” bustling suburb of Pasadena. Wade Dinsmore, general manager of Call it crazy like a fox. | PAGE 22 | Anniston Dodge in Anniston, Ala., says of his showroom. Sales didn’t just slip back to pre- clunker levels, as many had hoped. September’s sales rate “may be the Tight budgets worst of the year,” says Adam Jonas, Morgan Stanley’s lead auto analyst. cause no-shows The federal incentive that ended Aug. 24 propelled the seasonally ad- at auto shows justed annualized sales rate for Au- Several brands gust to 13.7 million, says Jeremy An- will skip the wyl, CEO of Edmunds.com, up from Frankfurt auto 9.5 million in June, the first full show, continuing month before the program. But the a trend among SAAR careened to 8.3 million from Aug. 25 to 31 before edging up to 8.9 JOE WILSSENS budget-cutting million in the first five days of Sep- To keep Flexible Products Co. alive, Chrysler supplier Glenn Reid laid off nearly half of his employees and cut salaries. automakers. But tember, Anwyl says. marketers say the shows still Analyst George Magliano of IHS sell cars. | PAGE 16 | Global Insight says: “I’d settle for any- So far, no supplier bloodbath thing in the 9 millions” for September. The rest of the year “will be de- pressed even compared to the first — but is that really good news? half,” adds Mike Jackson of CSM Worldwide. David Barkholz survived better than anyone had pliers will be dragged down by weak- George Pipas, Ford’s top sales ana- and Robert Sherefkin forecast. The relatively few large- er ones willing to make unrealistic, On lyst, says it is too early to say what [email protected] scale bankruptcies filed by suppliers low-ball bids for business. Only when September’s SAAR will be — and it DETROIT — In the spring, as auto have mostly been financial restruc- healthy suppliers can insist on con- the Web doesn’t much matter. “What is im- suppliers braced for the bankruptcies turings rather than liquidations. tracts that allow them to turn a profit This week at autonews.com: portant is not September,” he says, of Chrysler and General Motors and Now, though, some industry execu- will they be able to make the neces- Ⅲ Tuesday: News and photos “but the pace of the recovery and auto steep production cuts by other au- tives and consultants are lamenting a sary investments in r&d that the in- sales as we exit 2009 and enter 2010.” tomakers, their industry associations lost opportunity. They say a shakeout dustry needs, the executives and con- from the Frankfurt auto show. Some dealers see signs of life. pleaded for a federal bailout of up to would have been in the best long- sultants say. See autonews.com/Frankfurt Tom White Jr., general manager of $10 billion to prevent a bloodbath of term interest of the industry. To be sure, the winnowing contin- for advance coverage and Suzuki of Wichita in Wichita, Kan., bankruptcies and liquidations. Without the forecast wave of liqui- ues as the credit crunch drives sup- breaking news. The money never came. But neither dations, they say, price competition see CRASH, Page 30 did the bloodbath. Parts suppliers will remain ferocious. Stronger sup- see SUPPLIERS, Page 31 NEWSPAPER anpagead.qxd 5/22/2009 10:11 AM Page 1 TO SEE WHAT’S BEHIND YOU, GO WITH THE COMPANY THAT LOOKS AHEAD. FACT: Ford is delivering exclusive new technology that helps improve everyday driving needs such as changing lanes and backing out of parking spaces. 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To find out more, visit thefordstory.com D_17135_9_AutNew_R03.indd 1 5/20/09 9:27:32 AM 20090914-NEWS--0003-NAT-CCI-AN_-- 9/11/2009 5:14 PM Page 1 SEPTEMBER 14, 2009 • 3 84th year — No. 6377 briefs Mulally helps launch a redesigned congress Alan Mulally will be one of the Alan Mulally’s Marriott at the Renaissance Center, Key facts GM will participate keynote speakers at the 34th Auto- “One Ford” vision just a few blocks from Cobo Center, motive News World Congress in De- has led to the which hosts the Detroit auto show. in NADA convention troit. The CEO of Ford Motor Co. will successful The scheduling change and proximi- DETROIT — General Motors Co. begin the second day of the congress U.S. launches ty to the show mean it will be easier of the new Ford When: Jan. 12-14 will participate in the 2010 National on Wednesday, Jan. 13. for executives to attend both events. Since coming to the automaker Taurus and World Congress attendees will re- Where: Detroit Marriott at the Automobile Dealers Association from Boeing Co. in 2006, Mulally has Transit Connect. ceive a pass to visit the auto show on Renaissance Center convention in Orlando, Fla. successfully kept Ford out of the Thursday, Jan. 14, before it opens to Cost: $995 early registration fee GM traditionally has been a major same desperate straits that forced such as the new Ford Taurus and the public. by Nov. 20 (save $300) presence at the NADA convention. crosstown rivals General Motors and Ford Transit Connect. In keeping with everything hap- Information: 313-446-0326 or But GM’s restructuring this summer Chrysler to accept federal bailouts In a change from other years, the pening in the global auto industry, autonews.com/worldcongress and its rift with NADA over the and ultimately reorganize in Chap- Automotive News World Congress the theme of the congress is “Navi- Exclusive lead sponsors: group’s support of legislation to ter 11. opens Tuesday afternoon, Jan. 12, gating the New Automotive Epoch.’’ IBM and PricewaterhouseCoopers restore terminated dealers Mulally’s vision for developing which is also the second and final A new, tighter format includes a day products under the umbrella of “One media preview day at the North and a half of presentations. There will prompted speculation that GM Ford’’ already has led to successful American International Auto Show. be two dinners complete with be- and after-dinner speakers to round might snub the Feb. 13-15 U.S. product launches of vehicles The congress will be at the Detroit fore-dinner networking receptions out each day. c convention. In an e-mail to Automotive News, GM spokeswoman Susan Garontakos said there will be a A hands-on boss gives GM a nudge general GM make meeting at the convention. But she said: “I’m not Whitacre chairs sure how the brands will roll out meetings or utilize the space on the a board that’s exhibit floor.” breaking with past — Edward Lapham Jamie LaReau CFO Young is expected [email protected] to leave GM DETROIT — Ed Whitacre, once un- known in the auto industry, is shak- DETROIT — After 18 months as ing up the boardroom at General Mo- finance chief, CFO Ray Young is tors Co.