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January 31, 2009

Auto sales down in suburbia, dealerships close, cities suffer


The Contra Costa Times’ Elisabeth Nardi has an excellent analysis today of how, in our economic tough times, people aren’t buying as many cars, trucks and SUVs from our suburban dealerships. Unfortunately, that drop in the number of new and used care purchases is having a serious ripple effect--more like tsunami--on our region’s overall economy.

“Residents of the Bay Area, and the country, have been gripped by fear. And when people are afraid, they don't buy cars,” Wesley Harris, sales manager at Dirito Brothers Walnut Creek, tells Nardi.

"People are just scared to death," continues Harris, who has worked at Dirito Brothers for 16 years. "It's a struggle to sell cars. Until people feel confident they can keep their jobs, the car industry is and will be a matter of survival."

Nardi sums up: Dealerships' survival also affects residents in cities where tax revenues from auto sales have padded city coffers for decades. City leaders across the East Bay are sounding the alarm, as drops in that key source of revenue have helped prompt cuts in city job rolls and figure to result in municipal service cuts down the road.

This comes in the week that grim economic news came out of a conference Thursday held by the Association of Bay Area Governments. Essentially, what we've pretty much already heard, things are going to get worse before they get better. The Bay Area economy is expected to deteriorate until the third quarter of 2009 (July-September period), and a rebound is not expected until 2010, an economist said at the conference.

Meanwhile, back to auto sales. Some key facts Nardi cites:
--In Contra Costa County, new car vehicle registrations are down 25 percent from last year.

--In dealer-heavy cities such as Concord, auto sales reports show sales are down nearly 25 percent from mid-2007 to mid-2008. In fiscal year 2006-07, Concord's auto and transportation sales tax revenue was $7.1 million; in 2007-08 that number dropped to $6.2 million. Already this year, all sales tax revenue is 16 percent lower than what city leaders predicted last summer.
-- About 30 percent of the $20 million total sales tax revenue in Walnut Creek (my hometown) comes from auto sales. So far, aside from a Pontiac dealership that went out of business — since replaced by a Smart Car dealer — Walnut Creek has not seen any of its 13 dealerships close, [said City Manager Gary Pokorny].

--But that business [in Walnut Creek] has slipped, too. According to car sales data, new vehicle sales by dealerships in Walnut Creek from January through November 2008 were down 23 percent from that same time period last year.

--As dealers watch their bottom lines skid into the red, cities grapple with the loss of revenue. In Walnut Creek, when city employees have left, most have not been replaced. Creating a list of service priorities and making cuts based on that will probably be next, Pokorny said. This year's budget called for a 2 percent drop in sales tax revenue, but in reality he expects a greater plunge.

Nardi notes the following dealerships that have closed or will close soon:

Those already closed include Ford dealerships in Dublin and Oakland, a Volvo dealership in Pleasanton, and a Dodge dealership in Brentwood. The Diablo Lincoln-Mercury on Market Street in Concord is due to close February 28.

Read more about this latest challenge in our local economy in Nardi's story.

5 comments:

Mom's Exhausted said...

I thought there was Hyndai dealership in Concord at one time. But, it may have closed before the economy downslided.

Superior Firepower said...

Well Soccer Mom, just like the comments about Starbucks. (SO GOES THE CORPORATIONS).

The landscape as we know it today will be much different a couple of years from now. There is no stopping it. It's a "House of Cards" and always has been. The collapse has started and it will not stop untill it is done. Putting fear into the equation as well as time-lines is counter-productive.

Goodbye General Motors, Goodbye Banks, Goodbye Starbucks, and on and on. More Importatntly!

Goodbye to the corporate lobby influence that has destroyed our democracy and turned our political leaders into nothing more then sold out scum bags on both sides of the isle.

When the smoke clears in several years our country will be stronger and better off then we ever where, but we need to go through hell before we find heaven. Probably the most important thing to keep an eye on right now is to make sure that our treasury does not get looted in the process.

Anonymous said...

"Probably the most important thing to keep an eye on right now is to make sure that our treasury does not get looted in the process."

Too Late.

Anonymous said...

The City Council of Walnut Creek was warned about this very issue all the way back in early 2006 when the signs of declining car sales were already there.

One would think that this learned group would have taken heed when they know how very much of the annual sales tax comes from this section of local business. The Assistant City Manager proudly stated that they had built a "cushion" into the budget that would take care of this issue and that was one of her biggest points in saying that of course the city could afford $42 million for a new library. Guess her "cushion" lost some of its stuffing along the way and now the city is facing a real budget crisis.

Sometimes it pays to listen with open minds and ears to the informed citizens (who live in the real world) for whom you work.

Superior Firepower said...

San Francisco is now preparing to close Police stations and Fire stations. The same will hold true here on our side of the bay soon enough.

The state is sending out IOU's in leau of tax returns. Perhaps we should put all state and city staff on IOU's before we short-change the tax payers that flit the bill.

Just want to keep it real on who is really in charge.

No Bucks! - No Buck Rogers!