Over 27 years, Feld Chevrolet in Bridgeton built itself into a recognizable auto dealer and adopted the nickname "the Red Hot Dealer."
Recently, though, its sales weren’t so hot as its moniker.
When GMAC LLC stopped financing the dealership’s inventory in July, the decision left Feld Chevrolet scrambling to find a new lender. When it couldn’t find one, the dealership closed its doors last month.
Higher gasoline prices, a weaker economy and tighter money-lending standards for car buyers have squeezed new-car dealers like Feld Chevrolet. Customers are buying fewer vehicles, and the ones they buy are smaller and less expensive.
Although most dealers nationally and locally are enduring the tough times, some — in extreme cases — are shuttering their doors, laying off workers and leaving customers in limbo. Nationally, about 490 new-car dealerships have closed so far this year, according to the National Automobile Dealers Association. There were 20,770 new-car locations at the start of this year.
In the past several months, at least two St. Louis-area dealerships closed shop and one filed for bankruptcy. And several local dealership owners say more closures are on the way.
"There’ll be fewer players, and they’ll be larger in scale," said Vince Capatosta, the owner of All-Star Dodge Chrysler Jeep in Bridgeton.
TALK: When you see local car dealers closing, do you worry?
SALES SLUMP
Auto information website Edmunds.com predicts 14.3 million new vehicles will be sold this year, down about 11 percent from a year ago.
In new-car sales, dealers typically make the most profit on larger vehicles such as pickups and sport utility vehicles. When gas prices spiked, sales of these vehicles plummeted. Instead, buyers wanted smaller, fuel-efficient vehicles.
"Those entry-level cars were never designed to be profit-makers for dealers," said Jamie Auffenberg, who owns 12 dealerships in the St. Louis and Metro East areas.
That jarring switch was a blow to dealers like Bill Heard Enterprises, a chain with 14 dealerships throughout the United States. The dealer announced last week that it closed all of its locations, and it pinned its problems, in part, on a product portfolio laden with heavy pickups and SUVs. None of its dealerships was in the St. Louis region.
Product lineup is one big problem for dealers who sell General Motors, Ford and Chrysler products. Much of the automakers’ offerings have been larger vehicles, and the companies now are scrambling to offer smaller, more fuel-efficient cars.
In the meantime, sales for Detroit Three automakers are expected to be significantly lower this year. Through last month, Ford, GM and Chrysler have seen double-digit decreases.
All three automakers and their dealer networks are in tough spots, said Mark Rikess, chief executive of dealership consulting firm the Rikess Group in Burbank, Calif.
Take Dave Croft Motors, a Collinsville Chrysler Dodge Jeep dealership. To keep its business open, it filed for Chapter 11 reorganization in U.S. District Court on Sept. 17. President Dave Croft said his location sold 150 to 160 vehicles a month in 2004 and 2005, but sales have tumbled to a monthly average of 75 to 80 vehicles.
According to court documents, the dealership owes about $4.2 million to 36 creditors.
"We look for a long business selling cars" in the future, Croft said.
The sales slump and dealership closings also extend to foreign brands, although their sales are down by smaller amounts.
"It’s challenging for all of them," said Auffenberg, who owns both foreign- and domestic-brand dealerships.
But despite difficulties, dealers are still making deals and devising ways to ride out the slump. In late spring, construction crews began an 8,000-square-foot expansion of Kent Newbold’s O’Fallon, Ill., Toyota Scion showroom and service center.
Newbold, who owns a Toyota Scion location and a neighboring BMW dealership, said he never considered halting construction — even as gasoline prices rose this summer and auto sales nationally got tougher.
"People want a premium experience," he said free credit report instantly. His 38,000-square-foot space is set for completion in February.
DWINDLING OF DEALERS
For dealers with one brand, the economic situation hits harder.
Subaru of O’Fallon, Ill., owned by John E. Hanna, is facing a lawsuit from its lender, Peoples National Bank of Jefferson County. The suit says the two-year-old Subaru dealership owes the bank more than $2 million, and the bank repossessed the dealership’s inventory in July, according to documents filed in St. Clair County Circuit Court.
Hanna’s attorney, Steve Wigginton of Weilmuenster & Wigginton P.C. in Belleville, said the economic slowdown forced the closure.
"There were far too few sales on the front end, and the quality of cars that (Hanna) sold did not cause a lot of service work on the back end," Wigginton said.
Other local auto dealers said the Subaru dealership closed because it was a location with just one brand of vehicles, and that brand typically sells less than domestic brands like Chevrolet or Ford. Its problems started before the economy slipped, dealers said, and it never recovered.
Automakers like Chrysler and GM see single-brand dealers as being more vulnerable. They have been pushing consolidation among their networks, hoping that a smaller number of stronger locations will be healthier than too many dealerships.
Jack Schmitt closed his 19-year-old Chevrolet dealership in Collinsville in August because he had another Chevy location in nearby O’Fallon, Ill., and was about to buy Albrecht-Hamlin Chevrolet in Wood River.
"It was just GM felt we needed to consolidate, and it really did make sense if you stop to think about it," said Schmitt, who also owns a Ford Lincoln-Mercury dealership in Collinsville and a Cadillac-Saab location in O’Fallon, Ill.
On a national scale, "it’s typical to lose 75 to 100 dealers" during a strong sales year, said Paul Taylor, the chief economist for the National Automobile Dealers Association in McLean, Va.
Some dealerships still will open this year, Taylor predicted, but there will be a net loss of 300 to 600 new-vehicle dealerships across the nation.
Analysts and dealers point out that waves of dealerships closings are not unprecedented. In the 1970s, the rise of imported vehicles, oil crises and economic downturns led to large amounts of closings, said Chris Denove, vice president of operational research for J.D. Power and Associates in Westlake Village, Calif.
But current credit problems intensify dealers’ challenges.
The credit crunch not only affects consumers trying to get loans on new vehicles: It also challenges some auto dealers who are trying to get financing for their inventories.
"GMAC, in particular, is in a depression" because it made loans on autos and houses, industries whose values have greatly fallen, Rikess said.
Feld Chevrolet lost financing from GMAC and could not find another lender willing to sign a contract, President Drew Wolfson said. GMAC repossessed the vehicles last month.
The dealership’s closure happened because of market conditions, "but I’d still be open if I didn’t have my credit canceled by GMAC," he said.
AUTOS’ AFTERMATH
Even with closing and consolidations, consumers usually don’t feel the impact. But sometimes, customers can be caught in the cross hairs.
Michelle Pye, 41, of St. Charles, said she paid $15,000 in full for a 2007 Chevrolet Impala from Feld Chevrolet in August. But her temporary license expired Sunday, and she still hadn’t received the title in the mail by Tuesday. Pye said she called GMAC and Chevrolet’s customer service lines but didn’t receive any results.
After a call to the Missouri attorney general’s office, Pye was told she’d receive a form to fill out and then would get her title.
"But it’s still an inconvenience," she said.
atablac@post-dispatch.com | 314-340-8140
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