Metro Atlanta Chrysler and GM dealerships just trying to survive

The Pontiacs are the last of a dying breed. General Motors said it is killing the 83-year-old brand in 2010 as it seeks to reinvent and resurrect itself. Baranco sees a sales hook in that.

"I tell customers this is their last chance to buy a legacy," he said.

Every dealer has a story. Brillanti's and Baranco's are at the extremes. But they are bound by the thing that binds them all, the estimated 250 new car dealerships in metro Atlanta, and the thousands of Chrysler and GM dealers across the country: they are just trying to survive as Chrysler and GM whack their dealerships in restructuring schemes to rebound from billions of dollars in losses.

For the next few months, the Darwinian dance to determine who's the fittest, and who will fall out — based on a formula of sales, customer satisfaction, and financial soundness — will only get more feverish, said industry experts.

Meanwhile, dealers brutalized by a bad economy and tight credit are putting on a game face, hoping just to make it through the year, praying all the unsold cars will create pent-up demand and, by this time next year, a sales boom.

"If you ask a dealer who's going to stay, and who's going to go, they'll all tell you the same thing," said Brillanti, the owner of the biggest-volume Chrysler dealership in the state.

"They'll all say they're staying because they're vital to the future of the brand. Well, the truth is, some of us aren't going to make it."

Already the metro area is littered with the empty lots and blanked out windows of dealerships closed in a city industry analysts consider "overdealered" and one of the most cutthroat in the nation.

Baranco ticks off some of the names of dealers shuttered or now under new ownership — Saturn of Gwinnett, Royal Buick Pontiac GMC, Bickerstaff Buick Pontiac GMC Metro Dodge— including the old Mullen Chevrolet dealership across the street. It went out of business three years ago.

In some ways Mullen fell prey to the problems that plague all GM dealers, said Baranco. GM used to sell three out of every five cars sold in America. Now it sells one out of every five, as the number of GM dealers in metro Atlanta, according to GM, has shrunk to about 40.

"The problem was that the [GM] brands had different names, but we were all basically selling the same product," said Baranco. "Show me the difference between a GMC Yukon and a Chevrolet Suburban. You can't — because there isn't any."

The company began notifying dealers last week whose franchise it will not renew when they expire in October 2010 as part of the plan to eliminate 2,600 of 6,000 GM dealers nationwide.

Brillanti, 66, sold his first car, a Nash Rambler, at a used car dealership in Syracuse, New York, in 1962. He was shy kid just out of the Army trying to support a young family: "I didn't know what to do, and I had overhead," he said.

He overcame his "fear of sales," as he described it, to become a face familiar to Atlantans for the scores of TV commercials he's appeared in since he began selling Dodges here in the late 1970s.

This year his sales are down 30 percent and he's cut his staff from 160 to 115, but he's faring better than most Chyrsler dealers who, according to the company, average a 48 percent sales drop in April.

At Chrysler's Chapter 11 bankruptcy reorganization hearings in Manhattan, executives testified the company has lost about 400 dealers since January, bringing the number last week down to around 3,200. The dealers are going out of business at a rate of 35-40 a month, according to a Chrysler spokesperson.

Brillanti has been hit so hard he delayed plans to retire this year. "But," he said, "I'm still making money — just not as much money."

In the boom times two years ago "when we were blowing and going," his dealership sold 2,800 new cars and 1,800 used cars a year. "Now we think we'll sell 1,500 new this year, and 1,200 used," he said.

Since Chrysler has ceased production of new cars Brillanti has increased his inventory of used cars. "We have to keep at least 700 cars on the ground whether they're new or used," he said.

His strategy seems to be to big foot his way through the recession and shakeout by getting bigger instead of smaller. He's kept on advertising while others have trimmed budgets. In March he bought his fourth Chrysler dealership, in Athens (he also owns dealers in Jonesboro and Monroe).

In the end, he said, in an Atlanta market where Chrysler sells about 2 percent of the new cars and trucks, it will be better to divvy it up between fewer dealers than slice it between the 32 Chrysler dealerships now in metro Atlanta.

"When there's too many dealers scrambling for each other's business, there's little money to be made," he said.

Calculating exactly who makes what in a world of wheeler dealers is difficult, said Jim Ziegler, a Duluth, Ga.,- based automobile dealer consultant. But start from the assumption that "nobody makes money in new car sales and they haven't for years," he said.

"The pricing on new cars is just too competitive. Dealers make their money in used cars and service."

Atlanta accountant John Davis, who has advised dealerships on their books for twenty five years, said that dealers average a profit of 2-5 percent on new car sales and 10-15 percent profits on used cars.

They get into trouble when they mismanage their inventory, which should turn over every 70 days.

"When those cars aren't sold, the dealership is still paying interest on the loans" it made to buy them from the manufacturer, he said. "They aren't making any money. They're losing money."

When the costs of advertising, staff, and overhead are added to tanked new car sales, the numbers can get upside down in a hurry, said Davis.

Baranco has done all he can to keep his Lilburn doors open. He's cut his staff by 70 percent, whacked his inventory of cars and trucks from about 200 to about 50, and done little things to make operations more efficient and friendly.

In the old days, when a customer got his or her car worked on, the customer talked to one person at check in and talked to another person, the cashier, when the customer checked out.

"That wasn't always satisfactory because the customer would have questions about what work was done, and the cashier couldn't answer it," he said. "Now one person handles both."

Last month the dealership made $500. The month before that "we lost a little money," said Baranco. "We're just hoping for now it can at least even out over the year. But we're still paying our taxes, and still selling cars."

These days the sales are more used than new, which generates revenue, but upsets the ecosystem of a dealership, he said.

"A dealership is really about seven different businesses, when you factor in the service department, finance, tire sales, parts, and those kinds of things," said Baranco. "But nothing happens until you sell that new car."

Baranco, who also owns a successful Mercedes dealership in Buckhead, said he expects metro Atlanta will lose 70 or 75 dealerships over the next few years as GM and Chrysler slim down to meet the expectations of a federal task force providing financial backup and guarantees to cover car warranties if the companies go broke.

Pontiac will be gone. Hummer, Saturn, and Saab will be gone or owned by somebody other than GM. But will the survivors on this swept landscape be healthier in the end, or just hollow-eyed with fatigue? Baranco doesn't know.

"The industry has got to go on a crash diet," he said. "The key is not to kill ourselves in the process."

The information is based on dozens of interviews with owners of Atlanta dealerships, consultants, financial advisers to the industry, the National Automobile Dealers Association, and public relations officials at General Motors and Chrysler. J.Scott