Aug. 11, 2008 – Surprising aftershocks of the auto industry’s slump

It is infinitely difficult to put a positive spin on what is happening to the auto industry, especially in light of plant closings and layoffs that are occurring nationally.
An acquaintance of mine, somebody who has a unique view of the auto and powersports industries, provided a glimpse into the past and the future regarding the U.S. car business. He said the increased fuel prices and the reaction to those price hikes by consumers has spun the U.S. car business so badly that it is now in its poorest state since the early 1970s.
He also believes there is little hope the Big Three will escape this radical change without at least one mega-corporation vanishing altogether. An inability to make needed production changes as quickly as their competitors figure to critically injure at least one of the Big Three.
These thoughts came shortly after June U.S. auto sales were reported. Chrysler was down 36 percent. Ford was nearly as bad, at 28 percent. G.M. fell 19 percent. Altogether, it was the worst June for the auto industry in 17 years, according to the Associated Press. And the news isn’t expected to get much better in the months to come.
Where’s the bright spot to these dark tidings? For the powersports industry, it could come in the way of staffing.
I recently spoke with a dealer principal from Idaho who hired a new sales manager from, believe it or not, the auto industry. Why? Because the loss of business has cut salaries in the auto industry — not to mention jobs — to a point where a powersports dealer can now compete in the most crucial area: the paycheck.
This could be huge for the industry.
Certainly there are some cautions to employing people from the auto industry, but a national study proves the notable differences between the effectiveness of the average car salesman vs. the average powersports salesman. Car salesmen were more likely to greet their customers, build rapport with them and provide these customers a reason to buy from their store compared to their counterparts in the motorcycle industry, according to a 2007 industry comparison conducted by Pied Piper Management Co. The California-based company works with a number of OEMs, both in the auto and powersports industries.
Powersports officials who work with 20 groups say the Idaho dealership example is not a singular event, nor is it likely to be in the future. It could be especially good tidings for those dealers who are looking to improve their F&I revenue as the average auto dealership is often much more adept at capturing F&I sales than their powersports counterpart.
That’s not to say all auto salesmen or F&I staff will be a perfect fit inside powersports dealerships. We know they can be more aggressive in their sales tactics and approaches than perhaps customers are used to at their local cycle shop. Plus, it’s always a bit of a mystery about how people will react to getting paid less for working just as hard. (The Idaho dealer said he was able to match the employee’s most recent paycheck, but would not have been able to match it two or three years ago when auto sales were much better.) It’s easy for a prospective employee to dismiss the pay issue at the time of hiring, but will it be a simmering issue that will persist their mind and thus, affect their morale and performance in the months to come?
Those personnel issues need to be addressed but don’t diminish what seems like a great chance for the powersports industry to improve the quality of the overall sales and F&I staff.
After all, the retail boon from the government rebate money is coming to an end, meaning a highly qualified sales staff will become that much more important in the months to come.

The flip side of the coin

Other than the obvious ill effects of an auto industry dip — plant closures and job losses, etc. — there could be a negative impact that is less evident to powersports dealers. And that’s this: Because of the auto slowdown, there is much more general interest in the powersports industry as a new revenue opportunity from those outside the industry. And that new interest certainly includes the preowned side of the powersports business.
Discussions with half a dozen dealers at a recent powersports auction confirmed this thought. These dealers, who sell used cars and powersports vehicles, all said their powersports sales currently eclipse their car sales. One franchised dealer, who sells new cars and powersports, said he will continue to rely on his new and used powersports sales because he doesn’t expect car sales to rebound for quite some time.
Clearly, the preowned powersports inventory, either the items on the auction block or in the classified ads, will only continue to gain value as the auto industry continues to slump. psb
Neil Pascale is editor-in-chief of Powersports Business. He can be reached at npascale@affinitygroup.com.