Manufacturers’ Woes Impact Auto Sales
By Ted CraigU.S. auto manufacturers and their suppliers are announcing major job cuts daily and that’s bad news for many used-car dealers.Ford Motor Co. announced a restructuring Jan. 23 that will slash up to 30,000 jobs and close 14 plants over the next few years.A few days later, General Motors Corp. announced an $8.6 billion loss for 2005. Part of its difficulties stem from problems at Delphi Corp., the largest and latest parts supplier to declare bankruptcy.More bad news will come. There are 700 to 800 parts suppliers on the brink of insolvency, according to the Center for Automotive Research (CAR).All this is problematic for used-car dealers because of the impact on used-car buyers.Automotive jobs pay more than any other manufacturing sector. The average auto plant worker makes $63,825, while the average manufacturing worker makes $33,075, according to CAR.Auto workers may not be typical used-car buyers because they receive employee or supplier discounts and they are highly paid. But the money they generate in their communities is crucial to used-car sales.Every worker that builds a car in the U.S. creates 6.5 jobs in the national economy, said Kim Hill, director of CAR’s automotive communities project.The disposable income of auto workers attracts retail development to an area. When a town becomes home to a new Toyota plant, it also becomes home to a new Wal-Mart, a new Home Depot and numerous other big box retailers.When a plant closes, those stores stay away, Hill said. Real estate values plummet.People may stay in town, but they likely won’t be auto workers any more and their salaries will reflect that, Hill said.There’s no better example than Flint, Mich., whose woes from auto cutbacks were the basis for the 1989 movie “Roger & Me.”The town has never recovered from the plant closings of the 1980s, said dealer Don Hall, owner of Cars R Us.He estimates 60 percent of the area’s residents make significant commutes for work.Most of the local jobs don’t pay more than $7 or $8 an hour.All this is actually helping Hall, a buy-here, pay-here dealer with multiple locations.“The used-car market is great,” he said. “The worse the economy does, the better I do.”Even when a plant stays open, a town can suffer. DaimlerChrysler AG sold its New Castle, Ind., parts plant to Metaldyne Corp. in 2003, which eliminated 1,000 jobs and cut the wages of the 220 employees who remained.This has had a major impact on the local economy and what people can afford.“They buy a little less because they make a little less,” said Roy Denney, owner of Cardinal Sales in New Castle.Dealers who depended on local buyers for their sales suffered, he said.Denney’s family has been in the car business since 1946, but he worked in other fields before opening his store in 1996.“It didn’t scare me to advertise,” Denney said.He runs ads in all the automotive publications.He had somebody teach him how to build his own Web site, and it now accounts for about 80 percent of his sales. A year and a half ago, Denney started selling cars on eBay Motors.He recently sold a 1997 cargo van to a customer in San Jose, Calif.It helps that Denney also sells RVs, but he moves plenty of average cars, such as Toyota Camrys.He said other dealers who have been unwilling to look beyond New Castle have suffered.Not every town is affected the same when a plant closes.“If a community is fairly diverse in its employment, they can absorb it,” Hill said.An example is Hazelwood, Mo., one of the sites Ford is closing.The St. Louis area where the plant is located has a fairly vibrant economy that is home to a variety of companies from brewers to retailers.“We’re definitely concerned, but we’re hopeful,” said Tom Dean, general manager of GMT Auto Sales in nearby Florissant.While the domestic manufacturers are making massive cuts, the number of auto workers nationally has remained fairly stable as foreign manufacturers open plants in the U.S.Nissan Corp. recently opened a plant in Canton, Miss., for example.Because of the hurricanes that have battered the Gulf States, it’s been hard to judge the plant’s impact on the local used-car market, said John Rea, general manager of Rea Brother’s Mid-South Auto Auction in nearby Pearl.But there has been a definite impact on buying patterns, with more Nissans on the road.“Mississippians are going to buy Mississippi products,” Rea said.Because of the major impact of auto factories have on their local communities, Hill said it is in the best interests of used-car dealers, like all small business owners, to do what they can to keep and attract these plants.
Sourced from Used Car news
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