Hurricane-Hit Dealers Still Hurting

New Orleans - As attendees of the National Automobile Dealers Assn. convention head home from here, they leave behind some struggling fellow dealers in this city that still feels the hurt of Hurricane Katrina in 2005.

Hardest hit here were dealerships along Service Rd., on low-lying land near Lake Pontchartrain, site of a devastating levee breach, north of the downtown business district.

“There are several substantial dealerships over there that have recovered physically, but not fiscally from Katrina,” says Robert Israel, president of the Louisiana Automobile Dealers Assn. “They're dealing with a shrunken customer base.”

In a massive exodus, the metro population went from 485,000 people before Katrina to 91,000 afterwards. Not all have returned.

Troy Duhon, owner of the Premier Automotive dealership group, holds the dubious distinction of having the most Katrina-damaged stores.

“It was sad because I'd worked so hard for so many years to create the business and then saw the storm, in a blink of an eye, wipe it out,” Duhon said in a previous interview with Ward's.

Many independent dealers never recovered from the storm, because they lacked the financial resources of the franchised dealers who were able to rebuild.

Fortunately, most metro New Orleans dealerships escaped the storm's wrath, he says. “The thrust of the city's dealerships are on Jefferson Hwy. They were away from the flooding. Things are pretty much back to normal for them.”

Even before Katrina, New Orleans was not a major market for new-car sales. Ironically, demand shot up in the months following the storm, going from 13,500 units on a seasonally adjusted annual rate pre-storm to 16,000 post-storm.

“Lots of vehicles had to be replaced,” Israel says. “When people started getting their insurance checks, there was a tremendous bubble of vehicle sales.”

Dealerships also did brisk business repairing storm-damaged cars and trucks.

“The higher vehicle sales went on for about 18 months, and then there was a lag when the replacement cycle was complete,” Israel says.

Like dealers everywhere, those in New Orleans and the state of Louisiana now try to cope with the economic storm that has swept the nation.

But Louisiana, with a strong petroleum industry, is in relatively good shape. “The state economy is energy-based and better than average,” Israel says.

Louisiana auto sales were fast-paced in the first half of 2008, but then slowed as gasoline prices shot up, the credit crisis hit and domestic auto makers came close to bankruptcy.

“People here were just in a funk,” Israel says. “They felt insecure and didn't trust the auto industry, period.”

Louisiana's new-vehicle sales totaled 219,413 units in 2008, compared with 261,000 in 2007, according to the state dealer association. That is a 15.9% decline, but better than the 18% nationwide drop.

Slightly worse than the national decline, metro New Orleans suffered an 18.7% falloff in vehicle sales. Deliveries in 2008 were 53,533 units, compared with 65,861 in 2007.

But down the road, Louisiana “should do pretty well,” Israel says. “The economy is resilient. The governor has run public-service messages telling people the economy is good and to keep it going.”

At the NADA convention, Louisiana public officials try to make members of the auto industry feel welcome and appreciated.

“We understand the auto industry is the backbone of American manufacturing,” Lt. Gov. Mitch Landrieu tells a convention audience. “We'll stand with you as you rebuild. I know you dealers of America will help America stand back up.”