U.S. auto shakeout delivers Southern Nevada a big hit

By Mark Hansel

Friday, May 22, 2009 | 3 a.m.

The problems facing automakers in Detroit have reached Las Vegas in a big way.

Two of the Big Three U.S. automakers made announcements last week that will affect sales and service options in the valley.

Pending the approval of its bankruptcy filing in a few weeks, Chrysler Corp. will close 789 Chrysler, Dodge and Jeep dealerships nationwide — four in Las Vegas.

United Dodge on Sky Pointe Drive, United Chrysler Jeep on East Sahara Avenue, Marsh Chrysler Jeep on Centennial Parkway and Integrity Chrysler Jeep Dodge at Interstate 215 near Rainbow Boulevard are the local dealers on the closure list.

General Motors announced plans to eliminate about 40 percent of its 6,000 dealers. It will pare 1,100 of its dealers by choosing not to renew franchise agreements when they expire in October 2010, and it plans to sell off or phase out its Saturn, Hummer and Saab brands. GM notified the affected dealers last week, but did not release any names.

Because Chrysler has filed for bankruptcy protection, the dealers affected by its decision have no real recourse but to close their doors. A statement from the Treasury Department strongly suggests it will back Chrysler’s reorganization plan:

“We understand that this rationalization will be difficult on the dealers that will no longer be selling Chrysler cars and on the communities in which they operate. However, the sacrifices by the dealer community — alongside those of autoworkers, suppliers, creditors and other Chrysler stakeholders — are necessary for this company and the industry to succeed.”

Since GM is waiting until its current agreement with dealers expires and is giving dealers more than a year to prepare for the closings, it should also be able to withstand any legal challenges, according to industry experts.

Locally, the closings will result in longer waiting times for warranty and repair service for Chrysler customers and a longer drive for those in the southwest valley.

Towbin Dodge and Chapman Chrysler Jeep, both in Henderson and Chapman Las Vegas Dodge on East Sahara will be the only Chrysler Corp. dealers left in Clark County. Saitta Trudeau Chrysler Jeep in Pahrump will also remain open.

Dan Towbin, who co-owns Towbin Dodge with his son, Josh “Chop” Towbin, said customers might have to wait a few days longer for repairs or warranty work, at least initially.

“We knew this was coming and there are things we can do, short term and long term, to accommodate customers,” Towbin said.

Towbin said the options for the remaining dealers include adding mechanics from the closed dealerships, increasing the number of shifts for service technicians and moving some work to other facilities.

Currently, much of the prep work for new and used cars is done at the dealership, but that work could just as easily be done elsewhere and the same is true of warranty and repair work for customers. Towbin said his dealership has another facility available and the service areas at dealerships that are expected to close are also a possibility.

In a conference call to provide details about the closings, Chrysler executives said it was an extremely difficult decision that had to be made for the company to survive.

“There are no winners or losers,” said Jim Press, Chrysler vice chairman and president. “The fact is, the opposite of bankruptcy is liquidation, and through liquidation everyone loses — it’s all gone.”

Towbin, however, did not completely agree.

“I feel like a winner,” Towbin said. “I’m still in business.”

Although Towbin is happy that he is still selling cars, he takes no satisfaction in the plight of his fellow dealers, many of whom are like family to him. His eyes welled up as he scanned the list of closed dealerships.

“I look down this list and there are people I have known for a long time and am quite frankly shocked that they are even on here,” Towbin said. “Some of these guys are second- and third-generation dealers and it’s really sad to know they are just out.”

Towbin pointed out, however, that the leaner company with fewer dealerships would be better able to remain competitive in a market is shrinking.

In 2006 domestic sales of new cars peaked at 16.5 million a year. That number has shrunk to about 10 million during the current recession. Towbin thinks the market will recover some, and 13 million sales per year is an attainable goal, but it’s unlikely to ever reach those peak numbers again.

The plan for the remaining Chrysler dealers is to sell all of the company’s brands under one roof. Ironically, many of the cars they sell in the next few months will come from the closed dealers.

This is like rubbing salt in the wounds for the dealers who are forced to close as the remaining Chrysler dealers will pick up not only their brands, but also their inventory.

Chrysler does not expect its market share of about 10 percent to be initially affected and it has temporarily suspended new car manufacturing because of the bankruptcy filing. As a result the remaining dealers will buy from the closed dealers and in some cases, will be able to name their price.

Chrysler officials estimate about 44,000 new, unsold cars are in the inventories of the dealers targeted for closure. Because those dealers will soon have creditors at the door — if they don’t already — they will have to sell the remaining inventory quickly.

The real deals for consumers should come from the sale of “old” new cars. Because sales have sagged, there is still a substantial number of new 2008 and even some 2007 vehicles available. Dealers will get these cars for a song, and savvy consumers should be able to get a great bargain if they don’t mind a 2-year-old “new” car.

Scott Brown, Chrysler Communications West Region spokesman, said there is a risk the decision to shut down so many dealerships could erode consumer confidence and prompt more closings, but the company had few options.

“Absolutely, but (the decision to close dealerships) was necessary,” Brown said. “The industry has shrunk to a point where there is not enough volume to sustain the current number of dealers we have. Stronger, healthier dealers will better represent Chrysler and take better care of our customers.”

The GM closings, although greater in number, should not be as frenzied because of the amount of time involved.

“They’ve got a year and a half and if they want to exit early we’ll assist them,” said Susan Garantakos, a GM spokeswoman.

Garantakos added that there was no perfect matrix for deciding which dealers were chosen. The decision was based on a number of factors, including market saturation and sales volume.

Mark Hansel covers retail and marketing for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4069 or at [email protected].