The $200 billion in federal loan guarantees aimed at supporting consumer finance announced Nov. 25 is good news for the automotive industry, said local dealer Dave Grundstrom, chairman and part owner of Marvin K. Brown Auto Center in Mission Valley.
The guarantees help investors who hold securities backed by the debt of student, auto, credit card, and Small Business Administration loans.
Grundstrom, who sells Cadillacs, Hummers, Saabs and Buicks, said there is still ample credit available to customers with high credit scores. Lacking that, however, lenders evaluate customers on their ability to make a down payment.
He said sales at Marvin K. Brown are down from last year. Nonetheless, he’s confident his 58-year-old dealership will weather the slowdown.
Scott Grunwell of Arizona, whose family owns Courtesy Chevrolet in Mission Valley, views the $200 billion in guarantees as a much needed shot in the arm.
“Thus far, nothing has assisted the consumer,” he said.
According to the San Diego New Car Dealers Association, sales have plummeted 33 percent compared with the peak in 2004, with sales projected to drop another 3.5 percent next year.
But for General Motors dealers much depends on what happens on Dec. 2, when the Big Three American automakers, GM, Ford Motor Co. and Chrysler, are scheduled to head back to Washington to plead the case for their own bailout, Grunwell added.
“Detroit has legacy issues, but to just sit there and watch them die is the wrong choice,” he said. “There’s not a country in this world that would let its No. 1 industry fail. The auto industry is the chief consumer of rubber, aluminum, steel and electronics.”
San Diego Port Commissioner Steve Cushman, who sold Cush Automotive Group, which had eight dealerships three years ago, insists that it doesn’t matter how much money the government loans the Big Three.
“We can give the three dominant manufacturers $25 billion or $100 billion. It doesn’t make any difference unless they start building cars more Americans want to buy.” Cushman said. “It’s not a money problem. It’s a product problem.”
Regardless, he said he thinks that any steps the federal government takes to “lessen the credit crunch in today’s market will help the entire auto industry” will help.
“If you want to buy a new car, and a dealer can’t get you financed, you won’t buy a car,” Cushman said.
New vehicle sales in the United States for November were expected to be down 28 percent from a year ago, but up 1.9 percent from October, according to Edmunds.com.
Grundstrom expects that there will be a 15 percent decline in the number of local dealerships, either through closure or consolidation.
“Whenever there are too many dealerships, and each is not selling enough cars, they don’t advertise as much. And then they don’t attract as many customers and they don’t have the ability to attract and hire the right people, and therefore it weakens the sales that manufacturers should have,” he said.
According to the car dealers association, there are about 120 new car dealerships in the county with a total employee count of 10,000. The association currently counts 104 as members, down from 114 last year, said association spokesman Lance Roberts.
Last month, San Diego Dodge in National City’s Mile of Cars went out of business, and two other dealerships, Pearson Ford and Kearny Mesa Ford, merged and created Kearny Pearson Ford. Pearson Ford, on Fairmount and El Cajon Boulevard in San Diego, relocated its operations to Kearny Mesa Ford on Claremont Mesa Boulevard in Kearny Mesa.
George Belch, a marketing professor at San Diego State University suggested that local auto dealers get together and form advertising cooperatives.
“The idea is just to get consumers out there shopping and the first step is to get consumers even to consider shopping,” he said.