Looking For Buyers -- Slumping Sales -- Few New-Cars Sales Create Tough Market

Before every sales meeting, Bill McIntosh and his managers rub a crystal ball on his desk for good luck, hoping it will conjure up some new-car buyers.

Like other Puget Sound auto dealers, McIntosh could use a little luck. New-car sales at the North Seattle Chrysler-Plymouth dealership dropped 55 percent, compared with last year, in January. So McIntosh is desperately seeking new buyers.

``It's tough and inconsistent,'' said McIntosh, who has had salespeople calling customers from six years ago, asking for referrals. ``We're not seeing customers who are looking for new cars right now. Consumer confidence is just not there.''

Although not every Puget Sound-area dealer has felt the brunt of the nation's worst sales slump in a decade, many of them are finding that selling a new car is a lot tougher these days.

With demand slowing down, dealers have trimmed advertising budgets, laid off workers, ordered fewer new cars and bargained more on in-stock models.

``There are fantastic deals to be had right now,'' said Ashley Knapp, lead researcher of AutoAdvisers Inc., a car-consulting, fleet, management and buying service. ``There is an oversupply of everything. Even the hottest cars are well-stocked.''

All Puget Sound auto dealers have been affected by less consumer spending; some more than others. The National Automobile Dealers Association estimates dealer profits are less than 1 percent of net sales, compared with 4 percent a couple of years ago.

Although a few dealers described sales as miserable, others said sales were flat or slightly above last year's levels.

``Car sales aren't as good as we would like them, but the dealers are doing OK,'' said James Hammond, executive director of the Puget Sound Automobile Dealers Association. ``Those with the more popular vehicles are doing better, especially those who are still promoting their products.''

Although one prominent dealer, William O. McKay Subaru Co., has liquidated this year for reasons that are unclear, Hammond described area dealers as steady and said they are capable of surviving the downturn because Seattle's economy has not been hit as hard as other areas.

New-car registrations increased by more than 10 percent through November, to 132,306 cars and light trucks in King, Pierce and Snohomish counties, according to R.L. Polk & Co. of Detroit.

But over the past three months, several factors have combined to alter the selling climate.

-- The worst snowfall in years occurred in December, causing sales to plummet. Winter traditionally is slow; the snow just compounded the slowdown.

-- The new federal luxury tax on cars priced at $30,000 or more caused some people to buy before Jan. 1, when the law took effect. This hurt sales that normally would have occurred in January.

-- The recession and the outbreak of war put a damper on consumer spending.

``There are no quick fixes to get people in to buy new cars again,'' said Bob Cysewski, vice president of Bayside Automotive Inc., which closed a Chevrolet franchise recently. The closure was partly due to economic conditions as overall sales have fallen about 15 percent, he said. ``All you can hope for is to continue to do the things you do well and hope you'll get your sales.''

David Griffith, president of BMW Seattle, said his year-old dealership has remained within four units of its sales goals. ``We live a day-to-day life, but I feel fairly heartened. We are six weeks into the new year, and my worst fears have not been realized.''

Dick Hill, general manager of Lexus of Seattle, said sales have dropped about 25 percent from last year. ``I'm not taking big, expensive lunches anymore,'' he said. ``We're pulling in our belt, watching and controlling our expenses. And we're shifting some of our emphasis toward used-car sales.''

Dealers say they rely more on revenues from their parts, service and used-cars departments which, according to some industry estimates, can generate more than half of a dealership's profits.

Heavier emphasis has been placed on these ``backshop'' revenues because people are willing to repair their old cars or to buy cheaper, used cars instead of new ones. McIntosh, for instance, said he has sold twice as many used cars as usual this year.

``The person looking for the $7,000 to $8,000 car is what we're seeing, because the new-car buyer is not in the market right now,'' he said.

Cliff Pecknold, general manager of Frederick Pontiac-Buick of Seattle, said new-car sales slid 20 percent in January. But he added that low-cost financing incentives on leasing programs have helped. Pecknold said his leasing business rose 30 percent since incentives were announced earlier this month.

``The consumer doesn't have $3,000 to take out of a savings account and put into a new car right now,'' Pecknold said.

And, in addition to offering discounts on oil changes, Warren Westlund of Westlund Buick-GMC Inc. in Seattle has tried something different: He placed 35 new cars in the empty Woolworth's store in Northgate Mall for a week this month and sold almost half of them.

``We thought over the next three or four months we would sell about 20 cars from that display,'' he said, ``but we did better than that.''

Nationally, new car-and-truck sales have continued to slide, falling 23.6 percent in early February. The decline included a significant drop for domestically made Japanese vehicles, which have been historically strong sellers.

Despite the malaise, the National Automobile Dealers Association has not budged from its sales prediction of 13.8 million units this year, about the same as last year.

``We think there is a demand out there, and as war jitters diminish and the economy begins to show any upward trends, consumer confidence will pick up rapidly, and we will see an increase in sales,'' said Ted Orme, the group's spokesman.

Indeed, most analysts and dealers looking into their own crystal balls are expecting to see their fortunes turn by the second half of the year.

``As soon as the Gulf crisis is settled, that will make everybody more optimistic,'' said Hill of Lexus of Seattle. ``And, as interest rates come down, more confidence in the economy will be reflected.''