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Auburn auto dealer is 12th in region to close

Published: Thursday, Dec. 4, 2008 - 12:00 am | Page 1A

Another car dealer has folded in the region, and it's becoming increasingly clear that a government bailout for the U.S. automakers would translate into even fewer dealerships in places like Sacramento.

Auburn Buick Pontiac GMC on Monday became the 14th dealer in the greater Sacramento region to close this year, and the third in Auburn. "There's no one around here except the people packing up the dealership," said an employee answering the phone Wednesday.

The Auburn dealer is the latest casualty of a downturn that's humbled the entire industry. Parking their now-infamous corporate jets, top executives drove from Detroit to Washington in hybrids this week to beg Congress for up to $34 billion in emergency loans. Hearings are set for today and Friday.

High on the agenda is Detroit's promise of a significant downsizing that includes fewer brands and dealers. General Motors Corp. said it would eliminate 1,750 dealerships by 2012, more than one in four. Ford Motor Co. hinted that dealerships in big urban areas are especially vulnerable.

Steve Snyder, who owns Gold Rush Chevrolet Subaru in Auburn, said fewer dealers probably makes sense.

"I think a flushing-out is necessary," said Snyder, a regional vice president with the California New Car Dealers Association. But he added, "It would make me uncomfortable if I'm the one who's going to go out."

His sales volume has dropped 60 percent this year. That's been partly offset by an increase in repair work as two of his rivals in Auburn have gone under.

Detroit's new plan is its second in two weeks. After a disastrous appearance before Congress, in which auto executives were scolded for traveling by corporate jet, the Big Three brought out separate plans for survival. Among other things, they are pledging to spend more on product improvements and alternative, fuel-efficient cars.

President-elect Barack Obama called the new plans "more serious" than last month's blueprints. The United Auto Workers pledged support for cost-saving concessions.

Yet many observers said arming Detroit with billions in loans won't save the industry if the economy doesn't recover quickly. November car sales fell 30 percent to 47 percent, depending on the company.

"The dealership woes will not stop until consumers start buying cars again," said Peter Welch, chief executive of the California dealers group.

Welch said 112 new-car dealers have folded in California this year, vs. 20 last year. Art Spinella, an analyst with CNW Marketing Research in Bandon, Ore., said the figure is closer to 250.

Either way, dealership closures and related woes have significantly worsened the California recession, accounting for 11 percent of the state's job loss in the past year. Vacancies have been carved out of car-buying hubs like the Elk Grove Automall and Sacramento's Florin Road business district. The decline in sales has cost state and local treasuries tens of millions in tax dollars.

But many agree more dealerships will have to go.

"You can't have a dealership on every corner and stay in business, even in a booming economy," said Barry Unowitz, who lost his job as general manager when Chrysler Jeep of Elk Grove closed. "The day of the mom and pop store in your little town is over."

Unowitz now runs a used-car dealer, BarNone SuperCenter of California, on the same spot.

But if small-town dealerships are shaky, it's possible that some big-city dealerships might be the first to go. Alan Mulally, CEO of Ford, told the Washington Post his company has too many dealers clustered in large urban areas.

"They cannibalize each other," said Jesse Toprak, an analyst with car-buying Web site Edmunds.com.

Steve Pleau of Future Automotive Group, which runs two big Ford dealerships in Sacramento and Roseville, said his operations are on solid ground. He added that the bailout loans would probably have little impact on dealer health one way or another.

Of the 14 dealers in the greater Sacramento region to fold this year, six were in the city or its immediate suburbs. A seventh was in heavily urbanized Fairfield.

Some believe geography doesn't matter. What's really clobbering dealers is the credit crunch, which makes it extremely difficult for them to stock their showroom floors adequately, particularly with sales declining, Welch said.

"If you lose your flooring line, you're going to go out of business," he said.

Spinella said GM in particular might not lose many more dealers in California, if only because a huge volume of shops have already disappeared in the past 30 years because of pressure from imports.

More striking, Spinella said, is the possible disappearance of such brands as GM's Saturn line – a move the analyst welcomes. The company announced this week it will explore selling or closing Saturn.

He and others said the automakers have too many brands.

"What's the difference between a GMC truck and a Chevrolet truck, for goodness' sake?" said Snyder.


Call The Bee's Dale Kasler, (916) 321-1066. Read his blog on the economy, Home Front, at www.sacbee.com/blogs. The Associated Press contributed to this report.


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