Kitsap Auto Dealers Negotiate Rough Road

While some have had to consolidate space and trim staff, others say they can weather the recession intact.

By Rachel Pritchett

Few sectors of the national economy have been left untouched by the current recession, with cutbacks and changing strategies becoming the norm for many businesses.   

Large car American companies have been at the forefront of the issue for months now. And with the economy still stumbling, the effects have trickled down to the local level.   

With U.S. auto sales down 41 percent in February from a year ago, at least one Kitsap County dealership is significantly consolidating its operations. And others are reporting a shift in demand as their industry adapts to the recession.

“The economic climate certainly has forced us to circle the wagons,” said Rick Hern, president of Courtesy Auto Group of Poulsbo.

The dealership has combined its Chevrolet and Ford showrooms, consolidated its lots, and cut staff. It has also reduced its inventory 40 percent in the last six months, Hern said.

Courtesy also recently closed a Port Townsend dealership, with leaders eyeing reduced Port Townsend ferry service and an upcoming six-week closure of the Hood Canal bridge to replace its east half.

Consolidation of showroom space and other measures have also occurred at Haselwood Auto Group in the West Hills Auto Plex in Bremerton, and other dealers are thinking creatively these days to make it.

“Everybody’s hurting right now,” said Kevin Grey, general manager of Grey Chevrolet of Port Orchard, who said he has not had to lay off staff.

But auto dealers are noticing some changes that help the bottom line. Several interviewed say customers who need a set of wheels are choosing used cars over new cars. The shift is so strong, some said, that in some cases prices for used cars are rising with the demand.

Liberty Bay Auto Center of Poulsbo, which sells just used cars, has added a second used-car buyer to its employee stable, and the dealership is having to pay as much as 5 percent more per car.

“Our sales are up,” said Doug Haughton, director of operations for Liberty Bay.

Depending on the deal, that added cost might end up with the customer.

Kitsap customers have moved away from the economy cars and hybrids that began to gain favor last summer when gas prices were $4 a gallon. They’ve returned to their perennial favorite — pickup trucks — both big and small, new and used, some dealers said.

Also still selling nationally are Kias, Hyundais and Subarus, according to industry watcher

Lending is more difficult to get, dealers said, unless buyers have good credit. For buyers with marginal credit, “it is significantly more difficult to place those loans,” Hern said.

But money’s still out there.

Kitsap Credit Union, a leader in the local car-loan business, lent out more than $18 million in February for used- and new-car purchases, said Ron Rogerson, KCU senior vice president of marketing.

Many dealers’ eyes are monitoring the health of the nation’s automakers, particularly General Motors. GM this month reaffirmed its desire to steer clear of bankruptcy, and Ford Motor Co. and unionized workers agreed to contract changes that will cut costs for the troubled company, according to the Associated Press.

Strapped cities in Kitsap County are sorely in need of the lost sales-tax revenue they relied on during good times from local car sales during. Finance managers from Bremerton, Poulsbo and Port Orchard all reported less revenue from sales tax from cars.

In Bremerton, sales-tax receipts for sales of cars and car parts was down between 16 percent and 26 percent from December and February over those months a year ago. Andy Parks, director of financial services, called the drop significant.

In Port Orchard, sales-tax receipts from car sales dropped 24 percent between 2007 and 2008, according to Kris Tompkins, city treasurer.

In Poulsbo, budget writers decreased projected revenue from sales-tax receipts by 7.5 percent in the current budget, and that seems to be on target, said Finance Director Debbie Booher.

Meanwhile, car dealers, especially the ones who have been around awhile, are optimistic they can survive.

“We’re capitalized well to make it through this,” said Hern, of Courtesy Auto Group. 

“I’m part of the community. My father (John Hern) is part of the community. And we’re going to stay part of the community.”

Leave a Reply

Your email address will not be published. Required fields are marked *

Before you post, please complete the prompt below.

Is water a solid or a liquid at room temperature?