The Trials of the Auto Dealer

Kathleen Sponseller John StanovichJosh Sheppard Jared Simon

OverviewOverview• Reasons auto industry is slowing

– Tight credit– Rising unemployment– Home foreclosures– Widespread saving of discretionary income

• GM dealers started offering no-interest loans

OverviewOverview

• Auto dealers closing their doors• Domestic dealerships are having problems• Recession hit foreign makers as well as

domestic makers– Toyota 13%– Honda 5.4%– Nissan 9.1%

Johnny WatkinsJohnny Watkins

• Grew up in the 60’s on Kentucky cattle farm

• Attended Eastern Kentucky University• Took job at Chevrolet dealership in 1973

– In 1977, he bought a share of that dealership

• By 1997 he had acquired 2 dealerships– Chrysler– Buick-Pontiac-GMC

Johnny WatkinsJohnny Watkins

• His dealerships thrived in the 90’s• Became #2 Chrysler dealer in Kentucky• 275 acre farm• Beach Condo in Florida• Net worth of $3.5 million

Watkins’ DeclineWatkins’ Decline

• GM loses market share• Domestic manufacturers offer incentives to

dealerships• Dumped money in advertising• Stowed unsold pickups in nearby fields• 2006- Both dealerships losing $40k per

month• 2007- Attempts to sell business, nobody’s

buying

Elmer GambrelElmer Gambrel

• Kentucky Car Dealership owner • 1967 – became the local Toyota dealer• Received criticism for selling Japanese

made cars in rural Kentucky• Later purchased a Chevy-Cadillac-

Oldsmobile dealership (General Motors)• Very successful

Elmer GambrelElmer Gambrel• 1986 – Toyota assembly plant built 90 miles

away from dealership– Helped win over many Kentucky drivers

• 1991 – Elmer passed away, his son Larry took over his dealerships

• 2005 – As GM began losing market share, Larry decided to sell the GM dealership

Elmer GambrelElmer Gambrel

• Began to focus solely on his Toyota dealership

• As economy has weakened, began cutting expenses such as advertising and maintenance

• Has felt the effects of the economy– Too many cars on his lot– Has fared much better than American

made car dealerships

TodayToday

• Mr. Gambrel sells only Toyota – Sold his Cadillac and Chevy dealerships for

$500,000 in 2006– Cut costs on Advertising, maintenance, and

other services– Has about 125 new vehicles on his lot, about

50 more than he wants– Sales were down about 15% for the year,

however they could have been much worse

TodayToday

• Mr. Watkins was forced to sell his condo in Florida and close the doors on his dealerships– He currently has no job, and lives in a

house that the bank currently owns, his stay is only temporary

– Lives off of his wife’s pension, she is a school administrator

ConclusionConclusion

• The large amount of domestic dealerships, and no increase in demand has caused a lot of dealerships to close up

• The fewer number of foreign dealerships have survived, even with fewer sales

• High gas prices and the slowing economy have made people turn to more fuel efficient vehicles

ConclusionConclusion

• Chrysler has been hurt due to their line of cars containing only one small car and one hybrid

• In 2008, about 900 dealerships closed, roughly 86% of them were domestic make

Questions??Questions??