Local Car Dealers Face Uncertain Future

JONESBORO, AR  (KAIT)  --  Car dealers in northeast Arkansas reported big losses this year due to the faltering economy. U.S. auto sales have been at the lowest level in 25 years. An official with Fletcher Chrysler Dodge Jeep said sales have dropped 37% over the last year, a figure that's been repeated nationwide.

Central Chevrolet Cadillac said October sales figures were the slowest they've been in 17 years of operation. "We've been down probably 25% year to date. The previous month of October was the slowest we've seen in 17 years," said Ken Yarbrough, Vice President of Central Chevrolet Cadillac.

Yarbrough said more people are driving off car lots in smaller sized vehicles, which are more fuel efficient than traditional GM vehicles. "That's been General Motors' main problem right now. They've always concentrated on trucks," said Yarbrough.

"They've sold millions of cars and trucks and suv's over the last decade, and when gas prices spiked, those sales tanked. General Motors has never sold a lot of cars, so their making the adjustment now."

According to the Center for Automotive Research, if the federal government allows General Motors, Ford and Chrysler to fail, then more than three million jobs could be eliminated by the end of 2009. It would also impact any small business that relies on the companies. That, analysts said, would cause catastrophy.

A study by the Center for Automotive Research suggested state, local and federal governments would lose an estimated $150 billion in tax revenue.

Congress is expected to take up a measure next week during a lame-duck session, where lawmakers plan to give the big three automakers $75 billion of the $700 billion Wal-Street bailout package.

This came after GM reported it's strapped for cash, and could run out by the end of the year. Ford and GM spent $14.6 billion more than it took in in just the 3rd quarter. Ford Motor Company said it can make it through the end of 2009 because it liquidized assets in 2007. "Their planning to turn around early 2010, and I feel that Ford does have sufficient cash to make it to early 2010," said Aaron Baltz, General Manager of Cavenaugh Ford Lincoln Mercury.

Cavenaugh Ford Lincoln Mercury said sales are down 10-15% over the last year, however, since Ford has been making cars for a number of years, their economic forecast looks a little better.

In a Region 8 News web poll, 71% of those who responded said the government should not bailout the big three. Local car dealerships said that would lead to a steeper economic downturn.

"Just looking at it at first glance, I don't blame them. Because the last thing, we've really got a bad taste in our mouth as Americans, seeing our $700 billion dollars and not seeing much change in our economy," said Baltz.

"I think if they don't I think the reprocussions would be severe. I think that you're going to see a lot of suppliers, a lot of dealerships, that are going to suffer from that. A lot of people that the dealerships advertise with are going to suffer. I think it'd be a good thing for the government to give this money. I wish it were a loan rather than a bailout, but I think in the end they will be forced to do that," said Yarbrough.

"The last thing that our economy needs is one of the members of the big three to fail because there are so many jobs that are affected. That would affect people of northeast Arkansas," said Baltz.

Opponents to the bailout package said it would help those people who mismanaged their companies. Others don't know where these bailouts would end.

According to U.S. automakers, filing for Chapter 11 bankruptcy protection would not work because people would be reluctant to buy a car from a business that could go bad. Others said bankruptcy could be better because the companies could reorganize.

A record number of job cuts have resulted from the drop in car sales. The workforce of the automakers has been cut by 44% since 2005, from 244,000 to 139,000.

Ford Motor Company has cut jobs because it had to. "Some must take the sacrifice so that the organization can survive," said Baltz.

It also may be the best time to buy, according to market analysts. They said the federal government is trying to make it easier to get a loan by slashing interest rates. In the future, auto prices will rise because factories will make additonal production cuts. Those cuts will create a more profitable automaker, which will lead to higher prices because companies won't have to give discounts to sell their products.