As Dealerships Sink, Towns Suffer

(CBS)  In 23 years, Bruce Hamlin has never seen the car business crash this hard, this fast. Three years ago he was selling 130 cars a month at his Chevy dealership in Southern California. Now, with business down 50 percent, he barely moves 60, CBS News correspondent Ben Tracy reports.

"And it just keeps getting a little bit worse month after month after month," said Hamlin, who owns the dealership.

Nationwide, 750 dealerships have already closed this year and 150 more are expected to shut down by year's end, putting nearly 40,000 employees out of work.

When a dealership closes its doors, it's not just about the jobs lost at the car lot. It's about everything else the community loses along with them.

New and used car sales are the single-largest source of sales tax revenue for almost every city, county and state government in the country. In Los Angeles for every $28,000 car sold, the city takes in about $560 in tax revenue - a total of $80 million each year. Now with auto sales dropping, so is the revenue and that means …

"Less fire and police protection, less road maintenance, libraries closing. It can be extremely catastrophic," said Laura Chick, Los Angeles' city controller.

Car dealers are often the largest source of ad revenue for local TV stations, radios and newspapers.

"Not only do they spend a lot of money, they spend it frequently and throughout the year," said media analyst John Rash.

But this year, dealer ad spending could drop by $3 billion.

And then there's charity - everything from hospital donations to sports teams. A little league stadium in Sanford, Fla., can't be finished because it lost a $50,000 sponsorship from a local Chevy dealer that shut down.

"I feel bad for the kids who haven't been able to play baseball for two years," said George Pihakis, the president of the Seminole North Little League.

But the road is the roughest for those just trying to make a living.

"Every industry has peaks and valleys, but man, this valley seems to be about as low as you can go," said Matthew Gunderson of the Orange County Automobile Dealers Association.

And it could be a long drive back up the hill.

[VegasResident]

" Lexus dealer eh? You and others missed the point and probably always will. No doubt there are many things that should and could have been done differently to insulate themselves from these tough economic times. However, I bet it isn''''t hurting your snobbish pocket book if you can afford one of the most expensive cars on the market. One of the main points of the article is about the trickle down affect of failing dealers. One of the dealerships in my town is the primary benefactor of a summer camp for kids with cancer. By your way of thinking, tough luck and who cares right? You may be right about necessary changes but you''''re still a selfish arrogant snob none the less for failing to appreciate the gravity of the changes.

Posted by iCi2i at 02:01 PM : Dec 03, 2008
+ report abuse

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Gee whiz why not string him alive for trying to buy a Lexus????

The bottom IS is $31,000 a fair shake less than many American trucks such as a Avalanche which starts at $35,000 So just because he went there does not entitle you to rip him a new hole....

[VegasResident]

The problem still all goes back to housing. Bad loans were made, housing crashed. This led to people being stuck with houses worth little or losing them. This reduced cash to spend, this hurt businesses, busiensses laid off, these people lost their houses....less people were able to spend...this hurt businesses, etc.

For example, I need a new car. But, I had to move and so I own a second house I currently cant sell because it is worth less than I paid for it. I have a 30 fixed, 20% down and can afford the monthly costs, etc. But as a result, I cannot buy a car...If the house would sell I would buy the car. But Vegas has a billion foreclosures and they are selling for less than it even costs to build the same house...so I wait

Want to fix the economy? Keep people in their houses, stop the foreclosure and fire sales by banks and then other areas will recover.

[arnoldbowers]

The only problem with social security for those over the age of 65 is the only good thing mentioned above, the only problem here is our congress has just about robbed it for such things as the big dig in Boston, the new tourist thing in DC and ever thing else they could if all the money was given back to the social security they since Truman and his folks to gw and his crew has stolen for their friends we would not have any shortage this is the fact just look at the 100''s of trillions taken by one congress or another one president or another, the sick and the poor who paid nothing but now draw medicade from the social secutity which was not part of the original package nor was the orphan payment about the age of 16 in the original package now we have them drawing it for a broke finger, a headache, a broke rib you name it and you have the lazy getting social security under the medicade package. Frank

[arnoldbowers]

i can recall to the near past when they were closing the Airforce Base here in Austin, the city council and other authorities cried the sky was falling and Austin, Tx would dry up and fly away, well let me tell you it did not as a matter of fact gw bush and perry has mad billions out of that closuer and the city is charging down the road, so will the cities with the car dealerships closing they will survive and in a few years it will be forgotten, ever city has those thinking the sky will fall if this or that industry closes (here it is a high price car dealersiip who have made billions off the poor public for years), they are wrone as always, let the business move on and the people will find work elsewere. Frank

[tmittelstaed]

"... A nation''''s real wealth can only be created by producing and adding value to material, not by sitting in the middle and skim off the top..."

Dealerships do that, however. The automakers don''t want to spend money talking to end-users. It''s not like Dell Computers, where a computer being sold through a big-box retailer got zero value-add, with minimum wage salespeople selling them who couldn''t even spell the word computer - Dell Direct made a lot of sense, there.

With a properly run dealership, if you buy a car from them and you have ANY questions at all about it, you can pick up the phone and call them.

[bobnjersey]

[I can think of few things I hate more than buying a car from a dealer''''s lot. My last three purchases were over the internet where I didn''''t have to deal with the lies and pressure.]
[Posted by yellow651 at 11:37 AM : Dec 03, 2008]

my last car purchase was from a family owned pontiac dealership that also happens to be the oldest pontiac dealership in the country ... dating back to roughly the 1930''s. the grandfather of the current owner/operators is still alive at over 93 ... and he sold more than one car to my father ... over fourty years ago. mr. rassas (the patriarch) was in the showroom the day i purchased the car.

i have no doubt i did not necessarily get the best price. my intent was for all parties to win in the deal ... i get a car w/ reasonable level of reliability and reasonable cost ... the ''family owned'' dealership makes a profit on the sale ... an american worker has something to make (manufacture) ... and an american company hopefully makes a profit. any tussle between parties i see as a challenge of wits ... and part of the game of buying a high ticket item.

[Let them file for Chapter 11, restructure their union contracts, change their dealer organizations and focus on internet sales rather than huge expensive car lots.]

can you send your car in for service thru your broadband connection too?

[bobnjersey]

[Doesn''''t Father Washington, who the Indians have been calling the Great White Father for years know best? Let''''s see, Amtrack, the post office, Social Security, and Medicare come quickly to mind. Hmm, methinks that may not be such a hot idea after all.]
[Posted by dovestar at 10:06 AM : Dec 03, 2008]

is the ''so called'' free market fairing that much better ... with whole sectors of the economy failing miserably?

[ici2i]

once had a Lexus dealer hide the car keys for my trade to keep me from walking out. I have no desire to see my tax money go to car companies....

Posted by yellow651

A Lexus dealer eh? You and others missed the point and probably always will. No doubt there are many things that should and could have been done differently to insulate themselves from these tough economic times. However, I bet it isn''t hurting your snobbish pocket book if you can afford one of the most expensive cars on the market. One of the main points of the article is about the trickle down affect of failing dealers. One of the dealerships in my town is the primary benefactor of a summer camp for kids with cancer. By your way of thinking, tough luck and who cares right? You may be right about necessary changes but you''re still a selfish arrogant snob none the less for failing to appreciate the gravity of the changes.

[inketolstoy]

Our cashless society seems to be crashing. Maybe it is time to go back to the old way. No job, no money, you don''t need this either.

[yellow651]

I can think of few things I hate more than buying a car from a dealer''s lot. My last three purchases were over the internet where I didn''t have to deal with the lies and pressure -- I once had a Lexus dealer hide the car keys for my trade to keep me from walking out. I have no desire to see my tax money go to car companies. Let them file for Chapter 11, restructure their union contracts, change their dealer organizations and focus on internet sales rather than huge expensive car lots.