Back when there still was a real estate market, the San Francisco Bay area was one of the hottest. Los Gatos’ auto row included several venerable multi-generation family operations. Last year Swanson Ford gave up the ghost. Last week, Los Gatos Chevrolet hung up its spurs. Now lonely Moore Buick-Pontiac-GMC finds itself the sole survivor, stuck between the carcasses of Swanson on one side and Los Gatos Chevrolet on the other. According to the The San Jose Mercury News (SJMN), “Perhaps a dozen San Jose-area dealerships have closed in the past few years, including Silicon Valley Hummer, Stevens Creek Buick-Pontiac-GMC, Sunnyvale Dodge-Chrysler-Jeep and Sunnyvale Lincoln-Mercury this year. Smythe Volvo closed a location on Capitol Expressway Auto Mall, but remains open on Stevens Creek Boulevard.” Paul Melville of Grant Thornton LLP sums up the nationwide situation: “‘An increasing number of dealers are simply closing their doors because sales have plummeted, credit has dried up, the overall retail environment is increasingly challenging and potential investors are sitting on the sidelines… In addition, the domestic automakers who badly need retail consolidation are not spending much of their scarce capital on the problem because the economy is doing it for them.'” Even so, the dealer networks are not yet shrinking as fast as retail sales are falling. Carmageddon indeed.
Find Reviews by Make:
Read all comments
When I look around at vehicles on the roads here, nearly all the cars are foreign nameplates; only the “light” trucks are from the Big 3. No surprise, then, that the Big 3 dealerships are closing down.
What does a car salesman do after being laid off? Telemarketing?
But has there been a closure of any area dealership that was selling domestic brands?
People bought domestic cars in Los Gatos? That’s news to me.
polpo: People bought domestic cars in Los Gatos?
As a former LG resident, I can assure that the Chevy dealer sold little but trucks and ‘Vettes. And this goes back to 20 years ago.
Swanson Ford used to have a very brisk business, but then Ford was strong all over CA until more recent years.
Moore Buick-Pontiac-GMC? It was dead back then. Must be owned by an old-timer who paid off all his debt decades ago. It’s days are numbered.
The days of the single family owned dealership were numbered several years ago. Along with manufacturers having less of an appetite to deal with family owned dealers.
The present economic reality is facilitating the culling of single family owned dealers, which in many instances fits the manufacturer’s agenda.
Manufacturers prefer to have a “dealer group” since one franchise can lean on another, the store that is doing well with the ABC franchise, can support the store that is not doing well with the XYZ franchise.
Especially when it comes to new facilities a dealer group can easily support a new “glass palace” that is propped up by other franchises.
Almost all of the Chevy and Ford dealers in this area have relied on trucks and SUVs for the vast majority of their sales for years, so $4 fuel is hitting them really hard. Throw in the lease fiasco and tight credit markets and these guys just cannot survive.
Smythe Volvo is part of the huge Auto Nation group and they are cutting back from two Silicon Valley locations to one. The one they closed is the newer of the two. Other than Isuzu and Daewoo dealers, that is the only non-domestic brand showroom I can recall closing during the past few years. How B&B Saab in Sunnyvale keeps the doors open is a mystery to me, but again they have been there forever and may be sitting on a paid for facility.
Certainly the family owned dealerships are harder pressed to adapt to the rapidly shrinking market, but we are going to see many more cutbacks of the big groups as well if things continue to be as bad as, or worse than, September. I bet that many of these families are kicking themselves for not selling out to the big groups when the shopping spree was on. I know that the Smythe family sold out several years ago at about the peak of the dealer consolidation frenzy.
What does a car salesman do after being laid off? Telemarketing?
I’ve seen a couple car salesmen (that I took test drives with) working at Fry’s.
The various dealer groups of which many are public. As business gets increasingly challeging will be valued as to the mix of franchises they have in their portfolio.
The dealer groups will have to adjust their business model to accomadate the new credit reality, and francises discarding the one’s that do not perform.
It might be the beginning of the end of the over dealering situation.
Los Gatos still has dealers for Lamborghini, Ferrari, Lotus, Aston-Martin, Bentley and Rolls-Royce. The bottom may have fallen out of the market in Los Gatos, but the top is still fine.
How much more evidence do auto makers need to convince them that they need compelling products that beat the Asian competition?
They seem to work too hard in the wrong segments.
Its like painting the ship while it sinks.
Having lived and worked in Silicon Valley, or being co-located there and L.A. for nine years, this isn’t surprising to me. But again, just like local merchants vs. Wal-Mart, people only have to look in the mirror. You get the world your decisions instigate. The working element outside of tech and finance in Silicon Valley was/is as prosaic as anyplace else, but I saw massive unwillingness in tech and finance to consider or buy domestic cars that buyers actually liked, because it wasn’t cool in their peer group to drive Detroit. Where product quality issues were absent, the behavior persisted.
Living in the personal success havens of coastal California, it’s easy to see why many working people in the US simply conclude that the success class is against them. There was a time when some — even many — people would shop locally on principle and limit the scope of their new car purchase consideration to what benefits their local community. But what Los Gatos resident today would buy a Ford nearby when they could drive further to get, say, a Honda, Acura or a dolled-up Toyota badged as a base Lexus? Folks, we can have any economy we want, but we all have to take individual responsibility for shaping it.
But there’s a larger trend in play that probably is inevitable. Automotive distribution is going through the same transition that the consumer electronics and white goods businesses went through 30 years ago. When Best Buy was just another ordinary regional chain, there was a rich mix of retail outlets for hifi, TVs, emerging video and home appliances. Now that former ecosystem variety is sharply truncated and voracious public retail brands dominate the market with standard practices and broad multi-brand merchandising.
The car business is headed the same way. CarMax is doing more than their fair share to catalyze the market and reset people’s expectations for how to buy a car. Notwithstanding their deals aren’t the best, they standardize the experience, which is what most people want. The family dealerships haven’t adapted to that, and don’t have the capital to be one-stop shops.
Best Buy is the coming model for automotive retailing. Silicon Valley is just hurrying it along.
Phil
“Best Buy is the coming model for automotive retailing. Silicon Valley is just hurrying it along.”
It sure seems to be going that way, and personally I’m not thrilled with it. Be it electronics, books, cars or whatever I have typically found that good independent dealers (and yes, there are also bad ones) give better service while also being price competitive. Except for a few ad specials, Best Buy doesn’t really have great prices in my experience. Is the world really a better place because Blockbuster and Hollywood Video drove almost all of the independent rental places out of business? Personally I don’t think so.
This past summer we were in Ireland where a much higher fraction of the retail landscape is dotted with independent operators, and it was a joy being a customer there. Sadly, the big boxes are on the march across Ireland as well.
Phil,
The instant the single family dealership was overtaken by the dealer group, and no longer supported by the manufacturers it was only a question on time that the retail business would start emulating the computer business.
Years ago domestic manufacturers had well thought out mechanisms to put individuals in dealerships, and with time they would become the 100% owners. This is when manufacturers preferred to have a single individual own a single dealership.
50 years ago when an individual had an opportunity through GM to get a Chevrolet dealership it was tantamount to getting a license to print money. Similar to a dot.com start up of a few years ago, with the exception that GM through Motors Holding was providing the venture capital. Obvious they had a vested interested in having this dealer succeed.
With public dealer groups the manufacturers have lost some of their retail clout, and make their lives easier by pushing costs down the distribution chain to the dealer group, which then passes it on to the customer. Usually by having an aggressive business office to sell a myriad of ad ons.
The life expectancy of most electronic equipement is brief, and expendable, vehicles with increased electronic content are reaching a level of parity with some of the electronic equipment.
The term of a lease is 36 or 48 months…must be a coincidence that the life of a PC is about the same.
The days of dealing with the dealer principle who was an intrinsic part of the community are gone. Now its the sales process, the CRM software, the sales procedure, that takes over from what used to be a one on one transaction.
Brogan Cadillac of Ridgewood, NJ informed it’s customers this week that they will be closing their doors. Brogan started doing business in 1927. They survived the Depression of ’29, but the Depression of ’08 was too much to handle.
I for one will be glad to see the car industry go to a CarMax model. I would replace my cars more often if I didn’t have to deal with a dealer. I for one don’t even like to test drive the cars because my wife can’t deal with the aggressive salespeople.
skor wrote:
They survived the Depression of ‘29, but the Depression of ‘08 was too much to handle.
High quality survives recessions very well. Cadillac has destroyed its image. It took them a long time, but they succeeded. Mediocrity suffers the most in hard times, so Cadillac has only themselves to blame for this.