Marginal Victories

Auto Dealerships Benefit Us All in Many Ways

by Michael Barrett

Although one in five businesses on the Top 50 list is a new-car dealership accounting for nearly $400 million of the total gross sales here, the industry is struggling, according to dealers.

No, don’t get out your violins yet. There’s a good cause for this, and when you analyze it, the reason also pertains to most of the businesses on the list.

We’re talking about GROSS sales — in the case of the car companies, that means purchase price minus tax and license. From the total must also come wages, commissions, advertising, electricity, water, heat, repairs and maintenance on the building, mortgage payments and, of course, cost of goods.

“We’re managing nickels and dimes to make the thing work,” says Don Gordon Sr. of Gordon Nissan Suzuki. “Typically in this industry, if you’re seeing a store making 1 1/2 percent, you see a viable enterprise.”

“It costs a lot of money every morning to open the doors, with heat and lights and medical-dental insurance,” adds DJ Tapley, owner of two Top 50 dealerships, Skagit Ford Subaru and Skagit Auto Center. “And the IRS takes a huge amount, too.”

“If we’re getting back 1 percent of profit overall, that barely keeps the doors open,” says Larry Stordahl, general manager at Frontier Ford in Anacortes. “Nationally, there are a lot of dealerships closing down or consolidating because they aren’t making it. Skagit County is a little better off.” Frontier is the number-one Ford dealer in the state, he says.

Seattle Metro car dealerships are reporting a 34-percent drop in sales, influenced in part by the loss of dot-com and Boeing job, Stordahl notes. “In Skagit county, we’ve been staying 4-5 percent down, overall picture,” he says.

“The margins are getting narrower and narrower percent-wise,” continues Mike Blade, president of Blade Chevrolet of Mount Vernon. “After taxes on sales, it’s unbelievably small — between 1 and 2 percent. And that’s a good dealership.”

The national standard for profit margins on new cars is from 1.5 to 1.8 percent, according to the dealers. Depending on the price of the car, that can mean as little as $400-500. And then there are trade-ins that lose money, as well as used-car sales.

“Part of our job is managing cars we lose money on,” Gordon explains. “When talking about gross profit, take the people expense out of that — that’s the biggest — and then advertising; then you start to get in the red.”

 

Auto World a landmark

Tapley and Gordon are among a few dealers who occupy I-5 Auto World in Burlington. It was a trend-setting idea started by Jack Gubrud and a few others in 1978 to bring most major brands of automobiles into one location.

“It was built because there was a need,” Gordon, Gubrud’s successor, recalls. Old dealerships in Mount Vernon had outlived downtown. “Gubrud spotted the need to do something and came out here — way out of town — where there was a freeway interchange (and little else).”

“We were looking at property on the other side of the river (near the Cranberry Tree restaurant),” recalls Dick Blomberg, one of the original five who started I-5 Auto World. “The city (of Mount Vernon) wanted $50,000 for sewer fees. All of us were quite young then and we told the city, ‘We can’t do it.’ The county wanted $5 each from us.”

Gubrud with Nissan Datsun, Blomberg with Toyota, Gary Rygmyr with Lincoln Oldsmobile, Jimmy Burress with Dodge Chrysler Plymouth and Lyle Poppe with Ford took the county by storm. Their Auto World plan has since been copied nationwide.

Later, the City of Burlington annexed I-5 Auto World and today benefits the most. According to Rick Patrick, Burlington’s finance director, the city, where retail stores abound, receives about $5.2 million a year in sales-tax revenues of which $1.88 million comes from the various auto dealerships — about 36 percent of the total.

“Vehicle dealers are a vital contributor to our economic engine,” says Mount Vernon Mayor Skye Richendrfer, counting Blade Chevrolet and Valley Olds the two top car dealers in his city. “Blade is consistently in the top three retail stores, the others being Wal-Mart and Lowe’s.”

Car dealerships also contribute jobs.

“Blade Chevrolet employs about 70 full- and part-time people, and that’s a lot,” observes Blade. “A lot of families are supported, and you multiply that times the other dealerships in the valley and there’s the trickle-down effect.”

Some other facts about car sales in Skagit County, provided by Gordon Nissan Suzuki:

• Sales rose in January by nearly 33 percent over the previous January’s total. In a two-year stretch, sales have almost doubled, from 186 to 361.

• For the year, a total of 4,168 new cars were sold in 2001, compared with 2,835 in 2000.

• Used-car sales also were up, from 8,550 in 2000 to 9,055 in 2001.

• After 9/11, there was a steady drop in new-car sales — 290 in October, 206 in November, 135 in December — but fantastic interest rates, other incentives for customers and rising consumer confidence brought a spike of 361 sales in January. Used-car sales through this period remained about the same.

Between tax benefits, jobs and getting the “wheels” we need to transportation, car dealers do nothing but good for the whole county.

“Because we don’t have a tremendous amount of large companies here, a large portion of the sales tax generated comes from the car dealers,” Tapley reiterates. “We employ 71 people here. I live in the county. My father (Donald Tapley Sr.) lives in the county. We spend our money in the county.

“The money we make stays here.”