By JOHN DEMPSEY, Kokomo Tribune business writer
john.dempsey@kokomotribune.com
Daily it seems the media is full of reports on the ills of the automobile industry.
Sales are down; costs are rising. Ford's in trouble. GM's struggling. Chrysler appears to be on the market for the third time in a generation.
Tom Rethlake has seen and heard the stories and he's witnessed the automobile industry firsthand for 26 years while working at Eriks Chevrolet.
Although the firm's general manager can't speak about other Kokomo dealerships, Eriks "business has been challenging but very steady."
With such a high percentage of the population in the area employed at Chrysler and Delphi, problems in the automotive industry have those workers leery.
As one area salesperson noted, "the problems have scared a lot of the employees."
Rethlake realizes the concern.
"With the Kokomo economy tightly connected to the automobile industry, today's current economic situation has everyone's interest and is very challenging," he said.
But, he also finds people are still in the market for a new car, although their buying habits are changing.
"Chevrolet has always been a sales leader with several value-priced models, and we are seeing more interest on the value-priced vehicles than ever before," he said. "The population is looking for ways to [stretch] the dollar and spend on value."
Now, the Eriks general manager said, would be a good time to buy.
"In the 26 years that I have been in this business, now is actually is a great time to buy," he said. "It is a buyer's market, much like the housing market. The incentives are some of the best that I have seen."
Adams Auto Sales has been around for 15 years, and owner Brian Adams calls it the "worst I've ever seen it."
"We hadn't seen this type of downturn in business," he said. "Like everyone else, our sales are off. We're down 30 to 35 percent from a year ago."
Some of the sales drop may be the result of parents who have quit buying cars for their children.
"They may be waiting to buy that first car for their son or daughter, especially if they're going to send the child to college," he said.
Yet, "we're still getting traffic and people are shopping for cars."
While sales have dropped, Adams said the Internet has proved extremely productive for his business.
"We're getting more Internet sales - selling in places other than Kokomo. I would say that of our sales, 30 to 35 percent are from the Internet," he said. "We're getting people buying cars from as far away as St. Louis, St. Paul, Minnesota, and Atlanta, Georgia.
"As many used car salespeople as there are in Kokomo, multiply that across the country. We're selling a lot of vehicles to people out-of-state."
Both Rethlake and Adams agree financing is not a problem.
Lenders are in business to make money so it's in their best interests to make loans.
"Eriks Chevrolet continues to offer several financing opportunities from over 15 lenders when a customer decides to lease or purchase a new or pre-owned vehicle, so financing has not been a problem," Rethlake said.
The problem, Adams said, is not the credit crunch that's led to the U.S. government bailout of the financial industry.
"It's not the credit crunch, we can get people financed," he said. "Our biggest issue is people who don't have good enough credit. We may not be getting the quality customers we had before."
The problem, he's found, is often a customer's credit score.
"Maybe their score has dropped dramatically because of being overextended or extensive credit card debt. They get behind and that drops their score," Adams explained.
"Or maybe they pay their bills, but their debt ratio is so high that a lender won't give them any more money. It's a vicious circle."
When the price of gasoline hit $4, it put a dent in the purchase of SUVs and trucks and Adams turned the front row of his lot into a gas-savers area. As prices drop into the $2.70 range, that's changed.
"That's what people wanted, fuel-efficient cars. Now that [gasoline prices are] settling, we've pulled them back. People still love their SUVs and trucks," he said. "It's a false security, but as gas is spiraling down, they've softened their stance.
"It's what the gas prices are doing right."
Rethlake noted some people will always need trucks and those people continue to shop for them.
"The truck and SUV market did slip when the gas prices were high. ... Customers in the market for trucks are still going to buy trucks for business needs and to pull trailers, boats, farm equipment," he said.
"Trucks of all makes are more fuel efficient than ever before. Many of the trucks and SUVs also run on the E85/flex fuel which often is 60 to 80 cents less per gallon of gas."