Domestic Auto Dealers Setting New Sales and Profit Records

Dealers who survived the near-collapse of the American auto industry in 2008 are now setting new sales records and generating record profits.   Those profits have allowed them to increase their spending on local advertising, rehire technicians and sales people and renovate their facilities.

Spring Chrysler-Jeep-Dodge-Ram of Spring, Texas is one such dealership. At the height of the economic meltdown, General Manager Al Heggs says the dealership was selling fewer than 135 new cars and trucks per month, down from more than double that number prior to the crisis.

Hegg says, “It was tough times. You don’t take any solace in the fact that everybody else is suffering. You just got to figure out how to keep yourself above water.”

The dealership was able to do just that.  Today, it is flourishing as are many other survivors. On average, dealership profit industry-wide has nearly tripled since 2008.

Guggenheim Securities LLC managing director John Casesa says, “This was always an excellent business, a resilient business, and now it’s just about in as good shape as it’s been in for decades.”

Parts dealers have also been hiring to keep up with the growing demand. According to the Bureau of Labor Statistics hiring has been on the rise for 19 consecutive months. As of last month, the industry employed 1.72 million workers compared with 1.61 million in February of 2010.

Since emerging from its federally backed bankruptcy restructuring GM’s more than 3,400 U.S. dealerships have been investing heavily in renovations and upgrades. Chevrolet vice president of sales and service Alan Batey said investment in these activities will reach approximately $3 billion by 2016, and will include features like free access to Wi-Fi and bigger, brighter showrooms.

Dealers are also shouldering their share of the expenses. Chevrolet dealer Bill Perkins said he is investing approximately $2.5 million to upgrade his stores in Taylor and Eastpointe, Michigan.

Speaking about the dramatic turnaround experience by most dealers over the last couple of years, Casesa said, “Once these guys were able to catch their breath, they were able to reduce their cost base. Once they were able to adjust and volumes rebounded, the profitability has been almost off the charts.”

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