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Golden Road: While the Auto Industry Has Felt Gloom Nationally, Dealerships in California Have Been Basking in Sunshine.

Posted on: Thursday, 23 March 2006, 12:00 CST

By Mark Glover, The Sacramento Bee, Calif.

Mar. 23--Despite the doom-and-gloom news percolating throughout the U.S. auto industry this year, California has a far sunnier outlook than the rest of the country when it comes to auto sales.

For the last five years, the state's car dealerships have led their U.S. counterparts in average new-vehicle sales, a trend that's not expected to decelerate. That's the assessment of Bert Boeckmann, chairman of the Sacramento-based California Motor Car Dealers Association, who sat down for an interview at The Bee last week.

He expects California to remain in the driver's seat for new-vehicle sales because of a combination of factors: more licensed drivers, customer fascination with hybrids, the expected arrival of Chinese-made autos and a relatively healthy economy.

"The new-car dealers of California know that the (auto) industry significantly contributes to the prosperity of the state and, despite some of the issues that are a concern throughout the industry, cars are still a remarkable product to buy and sell," Boeckmann said.

"With the projections we're seeing for population growth in California ... I think there's reason to be optimistic."

Optimism, however, is not a nationwide trend.

On Wednesday, the latest bombshell dropped: General Motors, auto-parts supplier Delphi Corp. and the United Auto Workers union agreed to purge employment rolls at GM and Delphi. Under the agreement, GM will offer most of its 113,000 U.S. hourly workers incentives to retire or quit the company, while Delphi will give 13,000 of its 23,000 UAW workers the chance to retire.

While Boeckmann acknowledged that U.S. automakers are soldiering through tough times, he said California is a safe haven to ride out the storm.

He should know. His election to the CMCDA chairmanship was recent, but he has been a hugely successful car dealer for decades. As president of Galpin Motors in North Hills just outside Los Angeles, Boeckmann oversees an automotive empire that includes a No. 1 worldwide ranking in sales of Ford passenger cars and trucks for 16 consecutive years.

Auto industry analysts generally agree with his optimistic outlook for the state, ticking off California's myriad advantages as a car-selling market.

"You have, what, 35 million people out there now? That's equivalent to a whole region of the country, with millions of driving-age people," said Len Brewster, a Detroit-based automotive analyst.

He also noted the massive freeway system that's part of California's car culture.

"People depend on their cars in California, especially commuters in Southern California. You (also) have a mild climate, which means people are more likely to drive their cars 12 months out of the year."

Vehicle sales numbers provide evidence of California's seemingly bullet-resistant auto economy.

In what was regarded as a tepid year nationally for new-vehicle sales, California saw sales increase from 1.74 million units in 2004 to 1.76 million last year, according to new-car registration statistics amassed by R.L. Polk Co. That represents more than 10 percent of the 16.9 million new vehicles sold nationwide during each of those years, according to the National Automobile Dealers Association.

CMCDA also points to NADA data showing California dealerships pulling in far more sales revenue, on average, than dealerships nationwide.

According to NADA, average sales revenue for California dealerships was $54.5 million in 2004, the most recent year for which statistics were available. Nationwide, average U.S. dealership sales were about $33 million.

Boeckmann noted that California dealerships have prospered as the number of vehicle models and brand franchises have increased - a trend likely to continue over the next decade as Chinese-made autos from Chery Automobile Co. and Geely Motors enter the marketplace.

"I think you only have to look at what the Japanese automakers have done (in the U.S.) to appreciate the impact that the Chinese could have," Boeckmann noted.

Local auto executives agree that California's new-auto sales climate appears on track to stay healthy.

"I would agree with (Boeckmann) in principle, given last year's (sales) levels and new and used vehicle volume," said Richard Niello Jr., president of Sacramento-based The Niello Co., operator of more than a half-dozen mostly high-end dealerships in Northern California.

"We're doing well, but again, we're a company that's not dependent at all on pickups in our arsenal of vehicles. And we're not heavily dependent on SUVs."

Both of those segments have been hit by rising gasoline prices.

Margaret Tadlock, general manager and co-owner of Elk Grove Honda, oversees a diverse inventory that includes pickups, SUVs, gas-powered passenger cars and the Honda Civic Hybrid. She said sales of the gas-electric Civic are particularly brisk.

"The hybrids are doing very well, especially with Civic Hybrids (eligible) to go on the diamond lane on the highway. There's a lot of interest in that," she said.

Despite positive projections, Boeckmann said dealers statewide are concerned about the same issues that worry U.S. auto industry watchers worldwide.

Those include severe economic problems and cutbacks at GM and Ford Motor Co., fluctuations in interest rates and a growing demand for qualified auto mechanics to work on increasingly technology-laden cars.

Boeckmann said the cyclical nature of the auto business tends to foster perpetual wariness.

"If we weren't concerned," he said, "we wouldn't be auto dealers."

During a half-hour interview, Boeckmann touched on a wide range of auto industry issues, including:

* The future of fuel-efficient, environmentally friendly hybrid vehicles: "I think we're going to continue to see more hybrid vehicles and different hybrid (technologies) ... but hybrids are not the ultimate answer to the high cost of gas. I think they're just one step in the evolution of alternative-fuel vehicles."

* The recent backlash against large, gas-guzzling sport-utility vehicles: "There's no doubt that the market has changed, but people still want utility. Every manufacturer has an SUV, and there will still be demand for them. ... Customers who want smaller SUVs can find them."

* The secret for running a successful dealership: "When you think about it, cars are such wonderful things - the technology, the reliability, the ability to transport us in comfort. ... But it still comes down to the same things in the end. You have to offer customers what they want."

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Copyright (c) 2006, The Sacramento Bee, Calif.

Distributed by Knight Ridder/Tribune Business News.

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Source: The Sacramento Bee

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