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GM, Chrysler financial woes hit close to home

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By Emory Williamson

Consumed by rumors concerning the fate of the Chrysler corporation, Art Moser struggled to sleep on May 13. 

The next day, Moser, a managing partner at Perkins Eastside car dealership in Crestwood, received a FedEx package from Chrysler. 

He and fellow employees who congregated in the meeting room broke into applause as they learned they didn’t make the list of dealerships marked for closure. 

General Motors’ bankruptcy decision June 1 follows Chrysler’s decision to slash 1,100 dealerships as two of America’s three major car companies initiate sharp and significant measures to combat dwindling sales. 

The companies’ financial struggles affect numerous communities across America, including Oldham County.

Perkins endured significant hits with car sales in the past year as new car sales tumbled by 40 percent, Moser said. He attributes the dealership’s sales record and location as factors that kept the 64-year-old business afloat.

“There was some relief, but we’re still not over the hump,” Moser said.

Fred Tolsdorf, President of Champion Chevrolet-Pontiac Buick in La Grange, said his business has endured fewer car sales in light of GM’s bankruptcy.

Moser attributes Chrysler’s downfall to their association with Daimler, poor marketing decisions and production of more gas-consuming vehicles. 

Once fuel costs peaked at the $4 mark last year and the economy began to slip, earlier decisions punctured their revenue, legacy costs with unions and health care plans steepened and the company began initiating cuts.

“It finally caught up with them,” Moser said of the economic conditions and Chrysler’s previous business decisions. “Our sales started falling back at the end of last summer because we didn’t have the array of fuel-efficient vehicles that we needed.”

Although fuel-efficiency remains a priority, both dealers attribute the lack of connection between American car companies and younger car buyers – who often purchase foreign-made vehicles.

Tolsdorf suggests some GM dealerships failed to connect with consumers because they are outdated. 

GM designed the dealer network following World War II when GM had 60 percent of the market share. 

Now, with more foreign-based car companies sharing the road, GM only has 20 percent of the market share.

Moser understands lack of sales with younger generations, which he also attributes to outdated dealerships and fewer fuel-efficient cars, but also to the perception that foreign-made cars are of better quality and value.

“It’s going to take a long time to rebuild that trust and faith with the younger generation, but people need to re-look at the American cars because their quality has improved tremendously in the last couple of years,” Moser said.

But those setbacks have resulted in severe changes. 

According to Motor Intelligence, a web-based organization analyzing car sales, new car and light-duty truck sales have plummeted over the past year by 35.7 percent for cars and 38.9 percent for light-duty trucks. 

The largest drop is with mid-size sport utility vehicles at 55.5 percent.

Fewer car sales 

mean less money 

for Oldham County

In tough economic times, Oldham County Clerk Julie Barr says that two words continue to surface when Kentucky county clerks meet: scary and unsure.

“I would have never believed it would have been as dramatic as it is,” Barr said of the lagging economic situation. “Everybody’s feeling it right now.”

Although Oldham County boasts the state’s highest median income, Barr said that doesn’t mean the county can avoid the uncertain effects of the economy. 

Barr told members of fiscal court last month that not only are car sales down but when residents purchase cars in surrounding counties, they aren’t requesting paperwork to be sent to their home county. 

In order for Oldham County to reap the tax money from each car sale, buyers must request that their tax documents go to Oldham County. 

According to Oldham County Clerk documents, usage tax collection dropped nearly 11.7 percent, or $673,460 in one year. 

Based on collections through the end of April, the anticipated loss for 2009 will be 9.75 percent, or $497,000. 

If projections are correct, the decline in usage tax collections will reach more than $1.1 million, or almost 22 percent, since 2007. 

Those taxes are used to supplement upkeep on state roads with a portion going to the state and the rest going to the county clerk’s office and fiscal court.

Usage tax is when the purchase of a car takes place. Six percent is taken of the usage tax, with three percent staying in Oldham County and the other three percent going to the state, Barr said. 

When Oldham residents purchase a vehicle out of county, many dealers submit the paperwork to the dealer’s county of residence – not the buyer’s. 

 “It’s becoming such an issue because car sales are down and we’re scraping for every penny,” Barr said.

Even with tumultuous economic times and fewer car sales, many view the future as promising for 

business.

Although Champion and Perkins saw dramatic declines in new car sales this past year, they saw relatively stable used car sales as well as increases in the use of their services and parts departments. 

Perkins saw business increase 10 to 12 percent in their service and parts department business; Champion saw a 30 percent increase in used car 

purchases.

Dealers attribute the growth in business to the fact that customers are trying to keep their cars longer and in better condition in order to avoid purchasing new cars.

Tolsdorf believes fewer GM dealerships will result in less competition and subsequently better business for his dealership.

“It’s great news,” Tolsdorf said. “What the reduction in the dealers is going to do is make the dealers that are left a lot stronger. When you have stronger dealers they are going to spend more money with advertising and marketing and that’s going to help GM overall.”

Even as Perkins remains in a month-long limbo with no backing financial institution – as they had with Chrysler, which is currently in bankruptcy court – Moser thinks times are looking up.

“Sometimes I feel like a gerbil on a treadmill with business,” Moser said. “But if we can just get over this economic hump then we will continue to serve.”

E-mail us about this story at: emory@oldhamera.com