Bill Heard Enterprises closes its doors
Scottsdale, AZ., Sept. 24, 2008 – According to Automotive News’ Chrissie Thompson, Bill Heard Enterprises, the country’s top Chevrolet dealer group, is closing the doors at all of its 13 dealerships at the end of business today, according to a person with knowledge of the situation.
The company notified the stores’ general managers at 2 p.m. today, the source said, who spoke anonymously because he was not authorized to speak.
High fuel prices, cancelled floorplanning from GMAC Financial Services, a reliance on trucks and SUVs, a soft national economy and struggles in local markets had troubled the company, which on Sept. 12 closed its store in Scottsdale, Ariz.
In the end, the company could not raise operating capital and could not finance its floorplan, the source said. Company officials have discussed closing the company since Friday, the source said.
Bill Heard Enterprises, of Columbus, Ga., ranks No. 13 on the Automotive News list of the top 125 U.S. dealership groups, with 2007 group revenue of $2.13 billion.
Can’t answer the question posed about # of dealers at the time of a 13 million SAAR but franchised dealer counts are declining and will continue for the foreseeable future. According to an article in Automotive News on 9/22, GM store count is down 226 so far this year with 350-400 closures by year-end being possible. Chrysler has Project Genesis continuing and I’m sure Ford is taking similar actions too.
The current condition of financial markets as a whole and the automotive industry specifically can only exacerbate the situation.
I have a good friend who worked in the subprime mortgage business for a long time. He lived in Southern California, and he gave me a great analogy.
Every few years in Southern California, the underbrush begins to build up. A purging fire is usually needed to get rid of the unwanted underbrush and to let things start anew.
Admittedly, he had used the analogy in early 2007, when it looked the like the industry was going to be suffering from a purging fire and not eternal damnation, but I wonder if the metaphor holds true for the automotive industry.
Is the silver lining in the proliferation of dealership closings going to be that the industry will at least be right-sized for the future, and be subject to less cyclicality and volatility during future economic upturns and downturns?
I think you hit the nail on the head, Mike. The industry will be right-sized… for the near-term, anyway.
Leasing should be only for the cream of the customers. Buy here- lease here-pay here is an oxymoron. Those customers do not belong in a lease unless the dealer simply wants to gouge the customer as much as possible and then the dealer should install the GPS and ignitiion demobilizer because they are going to need them.
To the degree that losses are occuring (other than residual value changes caused by exogenous forces such as the price of gas) it usually reflects poor underwriting and that is what most of those lessors did to get sales.
Leases should be as stringent a credit criteria as any collateralized products.
Unfortunately, Americans are having to face the new reality that many no longer qualify for “their dreams”. They will have to settle for basic transportation needs until they can “afford” that “dream”. “Afford” does not mean 60, 72, or 84 month financing.