BILL HEARD CLOSES 14 DEALERSHIPS…A SIGN OF THE TIMES?
Las Vegas, NV.
This week saw the Bill Heard organization continue to close dealerships in Nevada, Alabama, Arizona, Florida, Tennessee and Texas bringing the total to 14. This after GM cut off credit to these dealerships.
Is this a sign of pending trouble for dealers or evidence of the market correcting itself for past wrongs?
There are many dealerships, lacking an heir apparent, that have closed the doors after the internet and too many dealerships in close proximity have cannibalized sales and profits. While the manufacturers decided consumers didn’t want to and shouldn’t have to travel more than twenty minutes for service, the boom of new agencies proliferating across the country proved to be the undoing of the industry. Dealers sat with inventory* languishing well past the six month level, driving rebates and incentives up to move the old stock off lots before dealers would order more. However, if the sheer number of dealers to shop wasn’t an issue, treatment of the buying public can certainly have an effect on long-term viability. The market can correct itself in many ways…
In the case of Bill Heard, rumors abound. One source suggested the company closed their GM franchises after litigation found the dealerships at fault. The East Valley Tribune, of Phoenix, Arizona reported, “In June, Bill Heard’s Scottsdale dealership was hit by a $225,000 fine imposed by the Arizona Attorney General’s office for allegedly deceptive advertising and sales practices. The attorney general said the dealership advertised special discounts that it refused to give customers, pitched super deals on cars it didn’t have in stock and promised to pay off money owed on trade-ins but didn’t tell customers any negative balance was added to the financed amount for the new car.”
The company, started in 1919, denied any liability and said they were making changes to confirm to state laws in Arizona and elsewhere.
Autonation closed a GMC-Pontiac dealership in Florida, not far from a Bill Heard franchise and several Ford dealers have given up their franchises rather than wrestle with the market. Gregory and Hendrick Motor Sports are said to be considering the purchase of some of the closed locations.
Those in the know suggest the market will right itself as consumers re-align their diet of new vehicles every three years, with ownership as leasing options disappear and longer lasting warranties protect 60 and 72 month loans. A tightening credit situation will also create the need for larger down-payments and higher FICO Auto scores. Gone are the days of 0% and 0 down except for those individuals with 740+ credit ratings and 75% available income.
There is a great awareness of GM’s dependence on gas-hogging trucks and suv’s, which certainly couldn’t be offset with demand for Cobalt’s, HHR’s and Malibu’s. A dealer has to sell three cars to match the profitability of a single Tahoe. Thanks to GMS-Employee Pricing, combined with heavy rebates and low interest offers, some credit-worthy clients are enjoying the best deals they have seen in years. However, that is not the majority of consumers kicking tires during this 2008 model year close-out.
Don’t be surprised to see more dealerships closing over the next year, as demand falls to a record low, aggravated by rising criteria for consumer credit worthiness and inventory flooring charges to dealers.
The only light at the end of this tunnel may come from service departments that do honorable work at reasonable fees, as most cars today have more computers in them than an average Joe can dial with their tv remote.
Sarah Lee writes as MYCARLADY.com. She is an automotive industry executive for over 20 yrs. For a no hassle deal contact her at www.mycarlady.com