Industry woes have auto dealers on the move

The landscape of auto dealers in Colorado Springs is changing dramatically, thanks to the upheaval among two of the nation’s largest automakers in Detroit.

Dealers here are changing nameplates, beefing up used car operations and moving entire dealerships in reaction to bankruptcy filings by General Motors and Chrysler in which both tried to slash their dealer networks while GM decided to shed brands to focus on four core brands.

For consumers, that means long-time brand alliances are changing. Pontiac and Saturn will soon be gone, Phil Long Dealerships is experimenting with a new strategy of selling late-model used cars, Daniels Chevrolet has joined a new used-car sales network affiliated with Motor Trend magazine and Al Serra Volkswagen moved from The Citadel mall area to an expanded facility near Chapel Hills Mall that formerly housed the company’s Hummer dealership, to name a few changes.

“The automotive industry is undergoing more change now than it has at any other time since the early 1980s,” when the industry faced high interest rates, high fuel prices and a deep recession, said Tim Jackson, president of the Colorado Automobile Dealers Association, a Denver-based trade group that represents 245 new vehicle dealerships statewide. “Times are tough, but dealers are finding ways to survive. The whole industry is challenging right now.”

The industry’s upheaval began last year as Chrysler shut down Lithia Colorado Springs Jeep Chrysler and nearly 800 other dealers nationwide a month after its May  bankruptcy filing, Centennial-based Burt Automotive Group shelved plans for a local dealership and California-based Piercey Automotive Group put plans for a second local Honda dealership on hold. Also last year, Red Noland Auto Group moved its Saab dealership to share space with its Cadillac dealership.

The upheaval likely isn’t over. Daniels Chevrolet is appealing GM’s decision last year to not renew its franchise along with more than 2,000 other dealers nationwide. Federal legislation approved late last year required Chrysler and GM to give spurned dealers an appeals process; both opted for binding arbitration that must be completed by late July for Daniels and more than 1,000 others who filed appeals.

Jackson said Daniels Chevrolet’s “prospects are very good” for winning its appeal. He said GM’s decision to not renew the dealership’s franchise was “arbitrary and capricious,” noting that most of the 39 dealers statewide targeted by Chrysler and GM were profitable.

Even if Daniels Chevrolet loses its appeal, the 80-year-old dealership in the Motor City area would remain open as part of the Motor Trend Certified Advantage used vehicle program it joined in November. Motor Trend owner Source Interlink Media joined with EasyCare, an automotive warranty provider, to launch a dealer program offering consumers used vehicles that have been inspected, repaired and covered by a 7,500-mile guarantee and coverage for dents and key loss.

“We wanted to set up our store to be sustainable no matter what,” said Elizabeth Daniels, owner of Daniels Chevrolet. “While we now carry GM-certified pre-owned vehicles, over time Motor Trend will be the one we use exclusively. Used vehicles are at least 75 percent of our business. Used had been the stepchild in the industry for a long time, but now it is the lead dog. Having certified vehicles gives the customer more security and confidence to buy a used vehicle.”

Daniels selected the Motor Trend affiliation because of the magazine’s national reputation as “the go-to source for consumers about automotive information for many years, like we have been in the Pikes Peak region for cars and trucks. We see it as a good match.”

The program also includes a concierge service for vehicle buyers, a rewards program and a free subscription to the magazine for anyone who takes a test drive at a participating dealer.
The Motor Trend program includes about 40 dealers nationwide with another 20 in training to join the program in a few months, said Jennifer Silverberg, vice president of marketing for EasyCare, which manages the 5-month-old network.

Likewise, the shutdown of GM’s Saturn brand doesn’t mean either local Saturn dealer will close. Phil Long Dealerships has converted both of the Saturn dealerships it owns in Colorado Springs — along with one in Denver — to a used-car sales concept it is calling Signature Series, which will feature vehicles that are less than a year old and have fewer than 15,000 miles on the odometer, said Mark Barton, vice president of Phil Long’s Saturn operations.

All three dealerships will continue to service Saturn and other vehicles, and can continue to sell new Saturn vehicles through Oct. 31, though all three locations have only about a dozen vehicles in inventory in total, Barton said.

Vehicles offered at Long’s Signature dealerships have been used by manufacturers, rental firms or executives and will be sold at half of the manufacturer’s suggested retail price with two years of free oil changes and a 100,000-mile warranty, he said.

“We are doing this to keep the business going and grow them. (Phil Long CEO) Jay Cimino has found a way to keep the employees and customers of these dealerships. Other dealers are even inquiring about whether we will franchise Signature,” Barton said.

The uncertainty about GM’s Hummer brand — a deal to sell the nameplate to a Chinese manufacturer has been delayed several times — and declining sales in the wake of higher fuel prices prompted the Al Serra Colorado to convert its Hummer facility near Chapel Hills Mall to a Volkswagen dealership that had been in a much smaller building near The Citadel mall.

Serra Colorado spent $1.5 million remodeling and expanding the building to accommodate Volkswagen, said Jerry Colten, the company’s owner.

“We wanted to have a Volkswagen location on the north end of town. There is one in Motor City, but none on the north end. We have sold more higher-end Volkswagens in the last month at Chapel Hills than we did all last year at our former location,” Colten said.

Serra Colorado is planning to spend another $1 million late this year on another expansion of the new Volkswagen facility, much of it to add space to a service department that is already near its capacity, Colten said. The company is making the investment because he believes the local vehicle market is poised to recover after new vehicle registrations slumped last year to a 39-year low. Colten points to a rebound in sales in the final two months of 2009.

“November and December are typically among the slowest of the year, so increased sales in those months are a good sign,” he said. “January was also good. I think the market is turning. We built this facility banking on that, at least in part.”
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Contact the writer at 636-0234.