Dealer Dodges Three Bullets

In the last year, Shuman Motor Sales has dodged three bullets as a Chrysler-Jeep dealership. But owner Bob Shuman is looking forward to a “major upturn,” especially when the Fiat 500 subcompact car goes on sale in 2010.

Shuman headed off a proposed new Chrysler-Dodge-Jeep store five miles (8 km) away. Then he ducked the fate met by 789 other Chrysler-brand colleagues who received dealership elimination notices as part of a Chrysler Group LLC reduction plan.

“As if that weren't bad enough, the Chrysler bankruptcy raised a stigma on our sales image that could have been a disaster,” Shuman says. “But it didn't happen, and our run rate in the first half kept close to our MSR (minimum sales responsibility) of 100 new units a month.”

Interviewed in his renovated dealership in the Detroit suburb of Walled Lake, MI, Shuman says the three Chrysler brands — Chrysler, Dodge and Jeep — have shown great resilience in the face of the dealership cuts, plant closings and management realignment.

Italian auto maker Fiat SpA acquired a 20% stake in Chrysler after it emerged from bankruptcy in June.

“I really feel bad for the dealers that got axed,” says Shuman, whose grandfather Thurlo Shuman, started the dealership as a Ford store in 1954. “They are good dealers and loyal supporters of Chrysler through thick and thin, as I am.”

Fiat entering the picture offers “a fourth brand to be sold from our existing dealerships, and not as a separate franchise,” Shuman says. He anticipates a market for the small Fiat 500 in the U.S..

Chrysler Financial merged into GMAC, which took over Chrysler dealer floorplanning and auto financing “without a hiccup,” Shuman says.

He cautiously does lease deals on new vehicles, “but that has been our policy all along.” Chrysler Financial had stopped leasing last year.

“GMAC is not hellbent on offering leasing deals to Chrysler dealers, but I think they'll change sooner than later,” Shuman says.

Offering preferred lease rates for repeat customers is a good idea. But Shuman frowns on 72-month leases, just as he balks at subprime deals.

“Seventy-two months is too long,” he says. “Folks, especially the younger ones, want to change their cars more often.”

His store sold more than 650 new units in first-half 2009. “Our service rate has been steady,” Shuman says. “And our used-car sales rate has grown.”

He employs 45 people. Eleven are in new-vehicle sales and 10 in used.

Shuman stresses the durability of customer relationships as a factor in his staving off Chrysler's plans for that new Chrysler-Dodge-Jeep store in the nearby city of Milford.

Shuman continues to pursue a Dodge franchise to round out his brand lineup. “Dodge would be a perfect fit,” he says.

The Chrysler Town & Country minivan is his No.1 seller, but the Sebring sedan “is an underrated value, as is the PT Cruiser,” he says. “Chrysler still offers a top-notch lineup, and I'm optimistic as all get out about our future.”

Franchise Losers Get LIFO Tax Break

A unique tax break has been issued for dealers losing their Pontiac franchises, setting a precedent which could be applied in the event of other franchise terminations.

The Internal Revenue Service says Pontiac dealers can use a 4-year spread to recapture lost LIFO (last-in/first-out) Income even if no new Pontiac vehicles remain in the dealers' inventories.

With the Chrysler Group LLC and General Motors Co. franchise terminations, many affected dealerships are facing LIFO recapture, says the Dixon Hughes dealer accounting firm.

“The LIFO reserves available with new-vehicle inventories will now become subject to income tax at these dealerships as there are no longer inventories to support the reserves,” Dixon Hughes says in a statement.

But the new ruling changes the standard for single-point stores like stand-alone Pontiac outlets, multi-franchise stores where separate LIFO calculations or pools were maintained for each of the franchises, or multi-franchise stores where all franchises were bundled in a single LIFO calculation. The IRS's new method allows dealers a 4-year spread of LIFO recapture resulting from lost franchises and offers “a much-needed tax deferral in trying times,” Dixon Hughes says.
舒By Mac Gordon