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Car dealers see sunshine in their busier showrooms

- The Washington Times - Sunday, February 12, 2012

Their ranks have thinned over the past three years, but a renewed sense of optimism has appeared in the showrooms of the nation's battered car dealers.

Even as President Obama has taken to touting the rebound of General Motors Co. and Chrysler Group LLC after the 2008-09 taxpayer bailouts, the dealers who sell their cars say revenues are poised to rev up in 2012 after a string of slow years.

"Business is good," said Paul Tibolla, general manager of Darcars Chrysler Jeep Dodge Ram of Marlow Heights, citing a 10 percent sales growth spurt last month. "The weather contributed to a certain extent," he said.

Mr. Tibolla attributed a strong month to new cars that Chrysler is producing. "The recent strength is largely due to new products," he said.

The number of U.S. dealerships, almost 25,000 two decades ago, has been declining steadily, but the contraction received a sharp push in the wake of the multibillion-dollar bailouts of General Motors and Chrysler. Over the protests of many local dealers, GM was allowed to shed some 1,100 dealerships before its 2009 bankruptcy reorganization, while Chrysler eliminated 789 of its 3,000-plus dealerships.

Entire brands - GM's Saturn and Pontiac, Ford Motor Co.'s Mercury line and Chrysler's Plymouth - disappeared from the marketplace. Today, the country has 17,700 new-car dealerships, down 17 percent since 2007.

But those that did survive are likely to see healthier bottom lines going forward, said Paul Taylor, chief economist for the National Automobile Dealers Association.

"We do expect there will be some restoration of [dealership] brands that are doing well," Mr. Taylor said. "But the net population of dealers is likely to be flat to down.

"New-car dealerships will apply to move to new locations to be more efficient to the population," he said.

The growing optimism of car dealers is reflected in a survey by Ally Financial Inc., the nation's largest automobile lender. The survey, conducted at the auto dealers association's Las Vegas convention this month, found that nearly half of the dealers expect their sales to increase from 10 percent to 20 percent this year.

With interest rates low and the average age of U.S. cars, trucks and crossover vehicles on the road at a record 10.8 years, according to a survey from the Detroit research firm R.L. Polk, car dealers are increasingly bullish that the turnaround has taken hold. "We're clearly seeing [the aging U.S. fleet] driving business at the dealer level," Jim Farley, Ford's chief marketing officer, recently told MSNBC.com.

About 92.5 percent of dealers in the Ally poll said they had a "positive" outlook for new-car sales for 2012, compared with 1.36 percent with a negative outlook.

Urban Science, an auto industry consulting firm, said that sales per dealerships in 2011 were about 711, up from 656 in 2010 and 564 in 2009.

The dealer rebound is even more striking because of the industry's fears as the auto bailout was being negotiated under President Bush and then Mr. Obama. Saying the inefficient dealer networks were one cause of their failure to compete with foreign rivals, GM and Chrysler pushed for the ability to cut ties with dealers, many of which had been with the manufacturers for decades.

A Treasury Department inspector general's report later concluded that government officials failed to consider the economic fallout when it agreed to closing thousands of dealerships as part of the managed bankruptcies.

The department "made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses," the report concluded.

The state of the U.S. auto industry and the dealers - many of which are large employers and civic contributors in their communities - likely will be a campaign issue this fall. As the Detroit automakers have returned to profitability, Mr. Obama has taken to claiming credit for continuing the bailout that Mr. Bush began.

"On the day I took office, our auto industry was on the verge of collapse," the president said last month in his State of the Union address. "Some even said we should let it die. With a million jobs at stake, I refused to let that happen."

Mr. Obama noted that GM has reclaimed the title from Toyota as the world's biggest automaker and that the industry has added nearly 160,000 jobs since 2009.

Republican presidential hopeful Mitt Romney has criticized the auto bailout as "crony capitalism." He says the administration "wasted a lot of money" by not seeking a managed bankruptcy to let the companies reorganize on their own.

The political sparring extended even to the Super Bowl, where a two-minute Chrysler ad starring Clint Eastwood met with conservative criticism for its upbeat message of economic recovery and for what some said was a subliminal plug for Mr. Obama's policies.

Mr. Eastwood denied any partisan intent.

"l am certainly not politically affiliated with Mr. Obama," he said in a statement to Fox News. "It was meant to be a message about, just about job growth and the spirit of America."

But, he added, "If Obama or any other politician wants to run with the spirit of that ad, I say go for it."

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