Thursday, December 4, 2008

More bad news for non-metropolitan economies as car dealerships fail

The tough times facing automobile dealerships -- particularly those dealing in American made vehicles-- have been highlighted in news coverage the past few days. The New York Times reported earlier this week on the topic in a story by Clifford Kauss. NPR stories in the past few days have echoed the theme, also discussing the impact that falling car sales are having on local government revenues.

Clifford Krauss's NYT piece highlights the difficulties facing two dealerships owned by Bruce Thomas, one for G.M., the other Chrysler-Dodge-Jeep, in Quincy, Florida, population 6,982. Here are some excerpts :

In this small town outside Tallahassee, Mr. Thomas had 50 employees only two years ago when his two dealerships sold an average of 24 new vehicles a month. But now Mr. Thomas is lucky if he sells three new vehicles a week, and he has had to dismiss 10 of his remaining 40 employees in recent days.
Thomas says he expects the situation to worsen.

Krauss explains that rising unemployment and falling home and stock values have brought down dealers like Thomas, even as gasoline prices have come down. The credit crunch is hurting dealers, too, as they rely on credit to keep their lots stocked.

An NPR story on December 1 featured the dateline Monroeville, Pennsylvania, population 29,349. There tax revenues associated with car sales are down 15-20%, which has forced cuts in local government spending.

Another NPR story yesterday focused on the mid-Atlantic states. Frank Langfitt's report features, among others, Chevy dealer Barry Williams in Elkton, Maryland, population 11,893. He says he is confident he will survive, though he realizes many dealers will not:

Williams' experience is typical of dealers across the country. He says the recession and credit crisis have knocked out 40 percent of his business.

"I've used the analogy of Katrina," says Williams, sitting in his near-empty showroom in Elkton, Md. "I'm in New Orleans right now, and the storm is coming and I didn't get out."

Implicit in these stories is that many of the 900 new-car dealerships (among almost 21,000) that are expected to close this year are in micropolitan places, places where these businesses have often represented a disproportionate chunk of the local economy in terms of jobs and taxes. And, as Clifford Krauss recognized in his story, these dealerships often represent still more than money and jobs in non-metropolitan places: "Most of them are deeply rooted in their communities, and each is a slice of Americana — their big flags flying, their radio advertisements compelling attention and their Little League sponsorships and other charity helping to improve the lives of local people."

For an earlier report on the trouble facing car dealerships, listen to this Nov. 4 story.

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