Moving metal: Utah's car dealers face industry stall.

• Author: Warren, Larry
• Position: Feature - Automotive

Tom LaPoint always kept a close count on the number of potential customers walking into his Ford dealership on auto row in Murray. Since he opened in April of 2002, there was more than enough to turn a profit. "We had a profitable business until mid-2008," the 35-year veteran of the car business says. But in the third quarter, with swirling media reports about Detroit's Big Three manufacturers, and with credit markets freezing, the customer count plummeted. "We watched numbers dwindle from 30 to 20 to 10 a day."

LaPoint, who moved from Denver to become Larry H. Miller's first employee in 1979, had already trimmed costs as much as he could. The only remaining option was to dig into his personal savings to get through the hard times, but with predictions of at least two more tough quarters in 2009, LaPoint closed and sold his assets to the Ken Garff Automotive Group, where he used to be chief operating officer. "Fortunately we had a willing buyer," LaPoint says.

Compact-Sized Business

New car dealerships are closing all along the automotive industry landscape. Nine hundred closed in 2008 and the National Automobile Dealers Association (NADA) predicts another 1,100 will close this year. At the NADA convention in New Orleans in January, General Motors held closed-door dealer meetings to discuss their collective futures. GM told Congress it plans to eliminate 1,750 dealers by 2012 and as many as 500 this year alone. GM also told Congress it will reduce its U.S. lineup to four brands from eight, leaving Hummer, Saab and Saturn dealers in limbo for now, while turning Pontiac into a smaller niche brand.

"When you take a third of the market out, a third of the dealers don't really have a business to go forward with," Chrysler President Jim Press said at January's North American International Auto Show. The car dealership business is in the early stages of a consolidation, which Utah will probably feel more lightly than most, but will feel nonetheless. As sales shrink in the recession, and if domestic manufacturers continue to lose ground to imports, Press' analysis is easy to understand. The nations, and segments of the Utah market, are "over-dealered."

"Consolidation is inevitable and it's happening now as we speak," LaPoint observes. "There are nine Ford dealerships on the Wasatch Front. There are six Toyota stores and they outsell Ford. And, Ford's market share has shrunk and Toyota's has grown. 'Over-dealership' is real."

Reduced Speeds Ahead

Overall, Utah dealers are better positioned than their counterparts in many...