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Dealerships hard-pressed to understand forced closings

May 16, 2009
By Wayne Sheets, Contributing Business Writer

On Thursday, 789 Chrysler dealers received a letter saying they were "cut off" and would have to close by June 9. That's about one quarter of its 3,200 stores accounting for 14 percent of its annual sales. General Motors said it would eliminate 2,600 of its American dealers, or 42 percent, by next year. The process was expected to begin Friday with the company notifying about 1,100 dealers that their franchise agreements will not be renewed in October 2010.

Charles Sheets, owner of Sheets GMC in Green Bank, is one of those dealers sitting "on the bubble" wondering if his franchise will be one of those forced into closure. If so, this will bring to a close one of, if not the oldest, new vehicle franchises in not only Pocahontas County but also the state. According to Sheets, his contract reads ". . . expires on Oct. 31, 2010. Dealer is assured of an opportunity to enter into a new agreement(s) at the expiration date if General Motors determines that dealer has fulfilled its obligation under this agreement."

Sheets said, "I think my father, Clarence, opened this store in 1922. He started out with Pontiac and Oakland. GM phased out the Oakland sometime after he opened the store and he dropped the Pontiac line in 1934 when he obtained the Oldsmobile franchise. The last Oldsmobile came off the production line in 2003. We then picked up the GMC truck line in 2005."

As this is being written, no one knows who will "get the ax." Sheets is only one of many that may see a two-generation - or longer -?family business come to an end simply because of a government mandate that General Motors, as part of their bankruptcy agreement, get rid of the "weaker and excessive" dealerships.

Dealers, regardless of size, are hard pressed to understand why they are the problem - they, after all, are the manufacturer's customer. West Virginia Auto & Truck Dealers Association President Ruth Lemmon in a letter to Kent Keyser, chief of staff for U.S. Rep. Nick J. Rahall II, D-3rd District, brought to light some hard economic facts if this mandate is enforced. She said, "The dealerships are not the problem; they are the solution. They are the manufacturer's customers, their only avenue for selling their products and generating much needed revenues.

"Cutting dealerships will not reduce their cost. Dealers buy and pay for their products, your local dealership provides the marketing, advertising, staffing and facilities to bring their products to the consumer. The dealer is the one with the cost burden - facilities, financing their inventories, and being the front line for the vehicles - not the manufacturer."

According to Lemmon, under the current proposed plan, West Virginia would lose at least 20 GM and 17 Chrysler dealerships. That would reduce the number of dealerships to a little more than125 storefronts to service the state.

This reduction in the workforce would add at least 1,000 to the unemployment roles and reduce the funds for local expenditures to support local businesses. It is generally accepted that for every automotive job at lest five support opportunities exist.

Lemmon asks, "How do you replace almost one-third of a $223 million payroll? ... Dealerships account for 16.8 percent of the total retail sales in West Virginia. We currently have almost 6,300 dealership employees. Where do these displaced employees go to find comparable employment?"

The numbers cited above by Lemmon are, in themselves terrifying, but what about the financial ruin of the dealership owners that will be forced to close. Many if not all of these small dealers are family owned and operated. Their entire life's work, savings and investment is in their business. What happens to them? Forced to close, what do they do with the real estate involved, the acres of asphalt, the buildings that house the showrooms, customer waiting area, maintenance shops and all the special tools and equipment that is germane to a very technical and specialized industry? How do you put an economic cost on the psychological effects of such devastation?

Another devastating effect of this plan, especially for those who live in the rural areas of the state such as Green Bank, is getting their vehicles serviced and the long distances they will have to travel to access other new and used vehicle dealers for future replacement of the ones they now own. Many of these dealers - Sheets included - are the only ones that generations of local families have ever dealt with. In a sense, the dealer is a part of the family. They don't want to deal with anyone else.

Current owners of GM products are also asking what effect all this will have on the warranty of the vehicles they recently purchased. Good question. If the company can simply throw out a contract, can't the same happen with the warranties that are, or should be, in effect? Doesn't all this push even more people away from GM products?

According to Sheets, we can do something as individuals. We can write to our elected representatives requesting they exert all the pressure possible in an effort to get this mandate overturned. The dealers are working "day and night" through state and national automobile dealers associations in an effort to stop this action. Dealers are asking everyone to contact their local and state chambers of commerce, and elected county, state and national officials and urge them to stop this devastating mandate.

As most everyone knows, the United Way offices have moved from John Street to Henry Avenue giving them a great deal more room including a well-appointed conference room. According to United Way's Executive Director Bonnie Phares, the conference room is available to organizations for holding meetings. A nominal fee of $25 is all that's charged for its use. For more information, call Phares at 304-636-0516.

While we're talking about the United Way, Phares also asked that I pass along that she and the entire United Way board of directors appreciate the sponsors of the United Way's Spring Dance Fever on April 18. Those sponsors were Citizens National Bank, Colonial Motors, Johnson Realty and Woodford Oil. Their generous financial help provided the foundation for a fun-filled and successful event. You have my sincere thanks as well.

This year's United Way Auction will be Sept. 12 at the First United Methodist Church. While the auction may seem a long way off, those who wish to donate should be thinking about those items and get in touch with Phares as soon as possible.

Here's a reminder regarding the workshop "Hospitality Management: Making Customers Feel Welcome and Appreciated" at the Elkins Depot Caboose Room at 5:15 p.m. on Monday. This is the perfect opportunity to refresh your skills and learn new ones on how to deal with the public. There is no charge for the workshop, but they ask that those wishing to attend call 304-635-7803 and make reservations because seating is limited. The workshop is being presented by Melanie Campbell, instructor of hospitality management at Davis & Elkins College and executive chef of the Mingo Room at Graceland Inn.



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