U.S. car dealers are slashing their work forces, laying off service writers, secretaries and sales personnel in a gritty effort to cope with crashing profits.
As reported by Automotive News, the collapse of vehicle sales that began in September has devastated already dwindling dealer profits.
In 2008, the average dealer lost money on new-vehicle sales for the third straight year, according to the National Automobile Dealers Association. And those losses keep growing.
On top of that, earnings from used-car and service operations are shrinking dramatically, so net profits before taxes overall are hitting lows not seen since the early 1990s. Dealers have scoured their stores for savings. Now, as a last resort, they are cutting employees.
In December, Galpin Ford owner Bert Boeckmann laid off 62 employees, the first job cuts since the Los Angeles dealership opened in 1946.
“I’ve got a lot of longtime employees,” Boeckmann says. “It was a painful experience for all of us.”
He adds: “We’re not making any money at all. We’re set up to do large volume, and we’re just not doing it.”
More than 50,000 jobs in new-vehicle dealerships were lost in 2008, new NADA Chairman John McEleney told dealers last month at the association’s annual convention in New Orleans. That was about 5% of the total number of dealership employees. Most of those cuts came in the fourth quarter.
Since September, Carter Myers Automotive has cut 55 sales and marketing positions — 18% to 20% of the work force at the Charlottesville, Va., dealership group, which has 12 franchises in five stores. The group’s 2008 profits will be down by about a third.
“The world changed with September,” says owner H. Carter Myers III, a former NADA chairman. “It took us 2 1/2 months to adjust our business model to the new realities of a market running around 11 or 10 and a half million units a year.
“Our focus is to be able to operate profitably on two-thirds of the business that we used to expect.”