Ward’s conducted a series of conversations with U.S. dealers in conjunction with the National Automobile Dealers Assn.’s annual convention in New Orleans to find out what’s on their minds. The following is an interview with/Scion/ dealer Ed Tarbox of North Kingston, RI.
Ward’s: How have used cars helped curtail the effects of dwindling new-car sales?
Tarbox: Used hasn't been the fallback position that it had been. It's been an extremely volatile used-car market. Most dealers that are doing business have been making mistakes in used cars. If you are paying a sales manager to do a deal, he's tempted to get a paycheck by over-appraising a car, because he wants to keep the iron moving and keep the sales people happy. There comes a day of reckoning with used cars – there's nobody in the dealer consignment lanes buying these cars.
People will be trying to get out from under the inventory they've got, because the only cars selling are fresh ones that you buy super cheap. You still have to do business. But I'm concerned about making the right moves on the chessboard. You can't not do business but there's a point where you are doing stupid business.
Ward’s: How did the end of 2008 play out?
Tarbox: We all got caught flatfooted, August didn't finish the way iit should have and September was even worse. We all know what happened to the balance of 2008. Dealers are all “over-inventoried,” especially with those little small, gas-sippers that were sustaining us when gas was $4 a gallon. We have maybe three or four months to get off of the leftover '08s, and we are selling them at any price.
You end up making money on a couple of them. But most are losers because everyone is in the same position, trying to get their sliver of a shrinking market with an inventory that's overgrown. What happens is you compensate by putting too much into trade-ins – all of a sudden, you wake up one day and say, “Geez, I have cars that are 200 days old and are $400 mis-appraised.”
Ward’s: What are the top issues for your brands this year, and what are some things the manufacturer needs to do for its dealers?
Tarbox: I haveand (brands), and both are in a good position. I'm in a better position than most. It's going to be an interesting year. Toyota (Motor Corp.) has always sold their products based on long-term value and resale value. They need to make sure they stay competitive, because a lot of the other manufacturers are getting down and dirty.
Hyundai (Motors Co. Ltd.) is trying to move product upscale. They are trying to put some value into the Genesis brand, but it happened at an awful time. Hyundai has always been known as the economy brand, or the value brand. Now all of a sudden, they're going upscale at a time when the market is needing that low-cost car with a lot of content.
Ward’s: What do you think will happen with new-vehicle sales in 2009?
Tarbox: It's going to be very interesting to see how these manufacturers maintain their market share or grow it. It's funny to watch them all react and try to determine what segments the growth will be in. Toyota got out of the fullsize truck market and was going to build a plant for Prius. Aeast they did it reasonably quickly, and said, Priuses are starting to back up. We're not so sure that with gas as cheap as it is that this is what we want to do for 2009. This year has a lot of question marks, as far as where the manufacturers want to go to keep their market share up.
One thing is for sure, the dynamics of what sells is going to change, and it has been for the past year. It's anybody's guess as to what's actually going to sell and what the heck will happen to fuel prices. Will people want the hybrids? Or, will they want the mini-cars? Will they go to fullsize cars because gas prices have come down, or get back into the SUV business?
Ward’s: Will you be attending theconvention?
Tarbox: Times are tough, and we're probably going to be sending only two people this year. You want to get the benefit of being at the convention – you get to commiserate, but also to find out what's going on in the industry. But if you send several people there, you have airfare and hotel rooms. We aren't rolling like we were, right?
Ward’s: What kind of vehicle do you drive on a day-to-day basis?
Tarbox: A Toyota Tacoma, a nice, conservative little pickup truck. I used to drive a lot of the used cars that were aged, but my managers got tired of seeing me in those cars.
Ward’s: Have you read any good books lately?
Tarbox: Nope, but I read all of the trade magazines. In fact I have a few of the back issues of stuff I'm supposed to read. When things are slower, like they are now – (when) you are not steering the ship away from the rocks – I read the trade magazines. The ones I've really been paying close attention to recently and trying to pull all the nuggets out of them are those with the Internet and customer-relationship management stuff.