Independent car dealers close

[Marika]

http://www.northjersey.com/page.php?qstr=e...jd2cWVlRUV5eTI=

Independent car dealers close

Friday, November 10, 2006

Bergen Record, New Jersey

By HUGH R. MORLEY

STAFF WRITER

Mullane Ford, a Bergenfield dealership that celebrated its 50th anniversary this year, will shut its doors for good today.

Owner Mike Mullane, 59, won't say much about why he's closing the business started by his father.

"There's a good way to get out of business and a wrong way," said the 6-foot-4 former dairy farmer. The right way, he added, is to "get out when you can pay your bills."

But Mullane -- in an Oct. 30 letter to his customers -- said that "the current conditions in the automotive business no longer make this dealership a viable enterprise." In closing he laid off 30 employees.

Industry executives and analysts say the dealership's demise reflects the tough market facing independent Ford vendors -- conditions that a month ago claimed Valley Ford of Westwood and could shut down other dealerships soon.

DEALER DATA

* * *

Average auto dealer in the U.S.:

Sales: $32.3 million

Pretax profit: $531,033

Percentage of sales from:

New cars: 60%

Used cars: 28%

Service and parts: 12%

The average N.J. dealer:

Sales: $40.1 million

Employees: 55

Dealership employees account for 7.7 percent of the state's retail workforce and earn 14 percent of its retail payroll.

They say that declining sales, the heavy concentration of Ford dealerships in North Jersey and the high cost of doing business in the region have put a severe squeeze on owners like Mullane.

Michell Van Vorst, executive director for the Hackensack-based Ford Dealers' Alliance -- which represents 1,600 independent dealers nationwide -- said that Ford has about four times as many dealerships in Bergen County as their much more profitable Japanese competitors. "That many dealers cannot survive on so little market," she said, noting that 36 percent of independent dealers nationwide are unprofitable. Many can only make money from ancillary businesses such as service and parts, and used car sales, she said.

"Dealers are no longer making money in the new-vehicle department," Van Vorst said. "It's not survivable forever. ... We're going to see more dealers go away."

Ford dealerships account for about 140 of New Jersey's 600 new-car sales outlets, according to the New Jersey Coalition of Automotive Retailers.

GM dealers -- who have about the same number of outlets -- face similar problems, but have the benefit of a wider selection of brands to lure customers, said coalition President Jim Appleton.

Both companies are losing market share in New Jersey, as they are nationwide.

Ford, which held 22 percent of the New Jersey market in 1995, now holds 12 percent, and GM has gone from 20 percent to 14.5 percent, coalition figures show.

That decline played a key role in the closing of Valley Ford on Oct. 5, said owner John Pratico, 73. By the time he laid off his 25 employees and closed, sales were down 50 to 60 percent compared with five years ago, mostly because the "latest models that came out in the last couple of years were not readily accepted by consumers."

In the end, he said, he simply ran out of money, having operated in the red for too long.

Industry analysts say that the problems confronting Ford dealers -- like the difficulties facing the car manufacturer itself -- stem from the past.

David Lucas, vice president at Auto Data Corp., a Woodcliff Lakes-based auto industry research company, said that many Ford dealerships were opened in the 1950s when the company dominated the car market and foreign competitors were rare.

Since then, of course, demand has dropped. But the number of dealerships has remained largely stable, Lucas said. Even now, he said, there is no widespread trend of Ford dealerships closing, just the smaller unprofitable ones.

Mullane and Valley Ford, for instance, had problems because they are not located on a highway, he said.

"You own a large lot in Westwood, the real estate is worth a hell of a lot more than what you make selling cars," Lucas said. Moreover, he said, Ford is not unhappy to see dealerships close.

"From a corporate standpoint, they're happy when a franchise closes," he said, because each has to be serviced with area representatives, dealer training and the new tools needed to service later models.

Appleton said that auto dealers face the same market forces as other retail sectors: the trend toward high volume, "big box" type operations that carry a large inventory.

Studies show that Ford dealers get about 3 percent of the sales price, out of which they must pay taxes, sales commission and overheads, Appleton said. Such a tiny margin is a big problem for smaller, low-volume dealerships like Mullane and Valley Ford, he said.

The answer is for dealers to curb expenses, focus on luring customers through value and customer service and to expand sales and parts business, Appleton said.

"They want to sell you a new car so you come back and get it serviced," he said.

That kind of customer service was key for Mullane Ford. In his farewell letter, Mike Mullane wrote: "We have always tried to treat you and all of our customers like family, fairly and honestly."

The dealership was started by his father, Edwin J. Mullane, who later founded the dealers' alliance to fight for the rights of independent Ford dealers.

Mike Mullane joined the business in 1991 and took the company helm around 1998, a couple of years before his father died at the age of 89.

Some customers have been coming to the dealership for decades, Mullane said earlier this week as he sat behind his desk beneath a photo of his father. As he spoke, Bergenfield resident John Sardo walked in, having just learned of the closure from his daughter.

"I was flabbergasted," said Sardo, 61.

"I was thinking, 'Your father is probably rolling in his grave,' Mike."

Sardo said he had bought four vans and three cars from Mullane Ford since 1979. Both his daughters have bought cars there, he said.

"I always got a good deal," Sardo said.

"Mike always took care of you."

[Cadillac Jim]

Cadillac and some other makes are not hurting as much as the industry as a whole, so I believe from what I have read lately. It does bother me that Cadillac's cash cows are the big SUVs and trucks. The crossover is a good idea, I think. I live the Caterra, and have high hopes that the 2007 model rollout in January will continue its success.

The Allante and E/K line brought Cadillac back into the spotlight after the Roger Smith years nearly flatlined Cadillac. The Caterra and SUV/truck line were responses to market demand, and the crossover was another market innovation. The XLR and V-Series are low-volume flagship lines that exist to define the marque, not make money, like the Corvette, Solstice, Mercedes SL series, Crossfire Mazda roadsters, etc. I think that the cash cows for the near future are the Caterra line and the SRX line, if the big iron slows down.

Right now, my dream cars are the CTS-V, the XLR-V, and the XLR Northstar. The Corvette with the same optional 427 engine is in there but I would rather drive the CTS-V every day. But, as you may discern from my recent avatar update and my signature photo, I love my ETC and have no plans to give it up.

But, as a whole, it is clear that a lot of auto manufacturers are going to have to deal with their sales of the next few years and scale their dealerships to match.

[Logan]

My nearby Cadillac dealer...Andrews Cadillac in Brentwood, TN. Is open 6 days a week...parts and service. Employees get like 4 holidays off per year. Thats it.

When asked about the 'extended' hours....reply was they were open because they might sell a car. In other words, they cannot sell a car if they are not open.