The view from the auto mall darkens

Allison Linn Senior writer • Profile • E-mail

Michael Wasserman saw the first signs that business at his Arizona car dealership was slipping as early as October 2006, long before the country entered a recession and the depths of the nation’s housing industry collapse were apparent.

Things have since gotten worse for Hyundai of Tempe, where Wasserman, the sales manager, has worked since 2001. Yet every morning Wasserman wakes up feeling optimistic.

“I always think, ‘Tomorrow’s going to be the day it breaks,’ and it’s been like that for two years,” Wasserman said on a recent sunny Friday afternoon, sitting inside a conference room as his sales team passed the time outside, waiting for customers.

But that doesn’t mean he is without worries. While Wasserman may greet the day feeling optimistic, he’s also likely to be jerked awake at 3 a.m., awash with concerns.

“I do wake up in the middle of the night and I do think about, 'Maybe I could have done this better,' " he said. “You second-guess yourself sometimes.”

As automobile manufacturers in Detroit and Asia struggle to salvage their businesses, and lawmakers in Washington, D.C., work to bail out the industry, car dealers in the Tempe Autoplex are living on the front lines of the auto industry’s devastating change of fortunes.

Here, the natural optimism and entrepreneurship that is essential to the car business is running up hard against the cold reality of today’s economy, which has strangled their businesses and led to layoffs and even some dealership closures.

Jim Seida / msnbc.com "History has to repeat itself,” says Michael Wasserman, sales manager at Hyundai . “I think it will come back."

In an industry already known for long hours and high stress, managers say the days have gotten longer, the responsibilities larger and the profit margins thinner. People who have been selling cars their entire lives are now contemplating a future very unlike the one they envisioned during the boom years, when customers were literally lining up to buy cars.

“I’m working 60-70 hours a week and I’m writing a check every month to keep the son of a bitch open. The issue is that I don’t know what it’s going to take to turn it around,” said Dick Ehret, who owns Tempe Lincoln Mercury. “At 55 years old, this isn’t exactly what we envisioned.”

Like many of the sales managers and car dealers at this auto mall just east of east of Phoenix, Ehret has been in the business for decades. And also like many of his colleagues dotted along South Autoplex Loop and South Test Drive, he’s never thought of doing anything else. He bought his latest dealership, Tempe Lincoln Mercury, in April 2006.

“I love the car business. It’s what I do. I like the action,” Ehret said.  “But, in hindsight, had I known what was going to happen …”

His voice trails off.

To cope with a drop in business, Ehret has had to lay off 20 percent of his staff and his managers have taken a 20 percent pay cut. He also recently told all his staff that he would have to suspend holiday and vacation pay.

For the first time in years, he’s working nights and weekends, all the while trying to keep morale up.

“It’s probably an entrepreneur’s spirit to be optimistic that things will turn around,” Ehret said. “One of the hardest jobs I have is to keep a happy face when I’m dying inside.”

Better times don't appear to be on the immediate horizon. At its annual convention this week in New Orleans, the National Automobile Dealers Association forecast a tough 2009 but said conditions should improve for car dealers in 2010. Paul Taylor, the trade group's chief economist, has singled out Arizona as one of the most difficult markets for car dealers, because of the extreme drop in home values.

'It's done a 360'
It wasn’t long ago that the mood around the Tempe Autoplex was completely different. The Phoenix metropolitan area has long been a boom town, with its sunny days and cheap land drawing Americans eager to escape cold winters and congested cities. Auto dealers say an already strong car market turned red hot when the housing boom hit a few years ago: Home prices in the area skyrocketed, and homeowners rushed to refinance, pulling out the newfound cash to buy big-ticket items, like cars.

“We had a great advantage because of the housing boom times,” said Jay Morgan, sales manager at Tempe Kia. “It sounds funny — we had lines to sell cars.”

Even in a fiercely competitive market jam-packed with car dealers — there are six Kia dealers in the metropolitan area alone — life was good.

And then, abruptly, the housing market started to collapse, bringing car sales down with it.  The Kia dealership, which had been used to selling 60 to 70 new cars a month, saw that dwindle to about 30 in September 2007. It’s been a tough road ever since.

“It’s done a 360. I don’t think anyone was prepared for it,” Morgan said.

Last summer’s soaring gas prices, the rising unemployment rate and tightened requirements for getting car loans have shrunk their customer base even more, especially among younger people. Mike Breyfogle, general manager of Tempe Dodge Chrysler Jeep, said these days he rarely sees a customer under 30 years old, and most are over 45 or 50.

In addition to the financial problems many of their customers are facing, dealers say changes in the auto industry also have made it harder to eke out a profit even on the sales they are making.

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