Washington auto dealers see sales pick up

V ince Sheehy can recall his disappointment in having to close his Chrysler-Jeep-Dodge   dealership in Upper Marlboro in 2009. At the time, it had been more than 30 years since  Fairfax-based Sheehy Auto Stores shuttered a location because of slumping sales.

But closing  the store was just the half of it.

Sluggish demand left Sheehy saddled with excess inventory of trucks that took six months to clear off the lots, which meant high carrying costs. The company also laid off more than 50 employees across its network of 14 dealerships in the Washington area. And the remaining staff took pay cuts to ensure no one else would lose their job.

“It was a brutal period,” he said. “We’ve always done a nice job in servicing vehicles, and that carried us through the tough times.”

Business started turning around in 2010, but really took off last year as Sheehy tracked a 12 percent increase in annual sales. In the past year, the company has added four dealerships, including an Infiniti auto store in Annapolis and a Lincoln dealership in Gaithersburg.

“We’re going to be smart about it, but our expectation is for some steady growth because we’re big believers in the D.C. market,” Sheehy said. “There’s huge pent-up demand.”

Sheehy is among a number of local auto dealers enjoying a resurgence in sales, as the U.S. auto industry, once on the brink of collapse, bounces back.

About 12.7 million vehicles sold in the United Sales in 2011, the highest volume in sales since 2008, according to Wards Auto, an industry research firm. The industry rang up roughly $817 billion in total sales, a 9.9 percent increase over the prior year, according to Census Bureau data. Analysts are forecasting 14 million vehicles will sell this year, not quite returning to the pre-recession high of 17 million.

Since auto sales data is not broken out by region, it’s unclear how much local dealers earned as a whole last year. However, Gerard Murphy, president of the Washington Area New Automobile Dealers Association, says many of his members surpassed the national sales growth average of 10 percent.

“Washington’s car market has always been a cut above the nation because of the presence of the federal government and the cottage industries that service it. That’s a very stable workforce,” said Murphy, whose organization is sponsoring the 2012 Washington Auto Show, which is running through Sunday.

Dealerships in the area indeed fared better than the rest of the nation in terms of the number of closings throughout the downturn. The local dealership count dipped 8 percent to 258 in the past four years, whereas nationwide it slid 15 percent to 17,767, according to automotive consulting firm Urban Science.

Consolidation of dealerships contributed to the sales growth of the remaining players in the market, said Steven Brooks, an analyst at Edmunds.com, an auto industry site. Dealers around the country, he pointed out, also benefited from an increased availability of auto financing. And low interest rates made financing options attractive to consumers.

Tammy Darvish, vice president of Silver Spring-based Darcars Automotive Group, echoed Brooks’ assessment, adding that consumers feel compelled to trade in older models.

“With the average age of a car being 11 years right now, more often these purchases are out of necessity,” she said. Sales across Darcars’ 19 local dealerships were up 12 percent in 2011 compared to the prior year. Customers at Darcars, Darvish said, have mostly been in the market for modest vehicles.

According to Edmunds.com, Chrysler was the fastest growing automotive brand among new car buyers in the Washington area last year, with registrations up 59 percent from 2010. Jeep brand, a division of Chrysler, placed second on the list, climbing 57 percent. Kia rounded out the top three by posting a 42 percent increase in local new car registrations.

Chrysler and General Motors, now the world’s top-selling automaker, received billions from the government in 2009 to retool their flagging operations. As a part of its restructuring, Chrysler terminated agreements with 789 of it dealers, more than 15 of which were located in the Washington area. The majority fought and lost, but some had their dealerships reinstated.

The experience left a bitter taste in Jack Fitzgerald’s mouth. The Bethesda-based auto dealer lost his fight to have his four Chrysler dealerships in Montgomery and Frederick counties reinstated in 2010.

Fitzgerald, who recorded more than 10 percent sales growth across his 15 stores, asserts Chrysler and GM benefited from Toyota and Honda’s supply chain disruption caused by the earthquake in Japan and floods in Thailand.

Economist Paul Taylor of the National Automobile Dealers Association agreed the spate of natural disasters factored into success of the American automakers, which will face stiffer competition from their Japanese counterparts this year.

The overall sustainability of the U.S. auto industry’s recovery hangs in the balance amid high unemployment and a listless housing market. Cuts in federal spending could knock the wind out of local auto sales.

But Sheehy maintains, “this area is so vibrant, with so many thriving industries, that I feel good about the future of the local economy, even if the federal government retrenches.”

Danielle Douglas covers the banking industry for The Washington Post.
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