ATLANTA — Not so long ago, auto buyers stumbled over themselves — and sometimes their own financial well being — to get new rides. They raced through lease paperwork, grabbed easy credit and nodded wildly when asked about home equity loans to cover monthly vehicle payments.
Of course, that was before consumers had their feet yanked off the economic pedal, leaving a lot less love on dealer lots.
Now, dealers around metro Atlanta and across the nation are scrambling to rework their businesses to survive one of the industry's roughest slumps in decades. Depending on the dealership, customers are likely to notice the changes, from fewer vehicles available on lots to harder charging salespeople and more pressure to pull into dealer service bays, typically a source of higher profit margins.
Some changes may be further reaching. One of the nation's biggest dealership groups, Asbury Automotive Group, which is moving its headquarters from New York to Duluth, Ga., is preparing to add salary to what had been largely commission-only compensation of its salespeople.
It's an attempt to help talented employees get through the current hungry times, said chief executive Charles Oglesby, who previously oversaw the group's Nalley Automotive Group in metro Atlanta.
But he said he's hoping it will stick, even after the market improves, leading to higher pay for salespeople overall and easing pressure to negotiate a fast deal.
Most dealers, though, would be happy just to get through the industry's immediate pain.
Steve Rayman, who has ownership stakes in nine dealerships, including five in metro Atlanta, has been in the auto business 30 years.
The current market, he said, "It's the toughest I've seen."
Sales are half what they were just a year ago, he said. "It's mind boggling."
Every month a vehicle sits unsold adds more financing expenses for the dealer.
"Our new car departments are terrible. We are losing a lot of money. There really is no net profit," Rayman said. "When customers come in the dealership now we are a lot more aggressive. We have got to put every customer in a car."
The economy slowed. Lenders cut back on credit for buyers. Gas prices surged. Banks and lending arms of auto makers opted to curb or eliminate leasing options that in the past enabled consumers to get more expensive vehicles and keep them for shorter periods. At the same time, many manufacturers — particularly domestic makers —are teetering after a stunning shift in the kinds of vehicles consumers want to buy: smaller, more efficient cars.
Adjusted prices for used full sized SUVs sank 26 percent in July compared with the same month a year earlier, according to Tom Webb, the chief economist for Manheim Consulting, an arm of a large wholesale auto auction company owned by the parent company of The Atlanta Journal-Constitution. Full sized pickups fell nearly as much, while prices for used compact cars jumped 16 percent compared to a year ago.
The problem for dealers is that small cars aren't making up for the slack from large vehicles. Overall new car sales are down. And profit margins tend to be lower on smaller vehicles that are selling, compared with decked out SUVs and pickups.
Oglesby of Asbury Automotive doesn't see the market coming back for perhaps six more months. And even when it does, he predicts the shift toward smaller, lower profit cars will not reverse.
Even as gas prices go down, dealers won't see the previous demand for pickups and SUVs.
"We have to adjust our business model," he said.
Asbury is looking for other ways to improve its finances, particularly with higher margin areas of the business, such as service and parts. The company has gotten more disciplined in following the lead of dentists: setting up appointments for future visits before customers drive away after service. And it recently began offering Sunday hours at its metro Atlanta service departments, with the idea of eventually doing the same at dealerships in other states.
Though car sales have slowed, customers are often finding fewer vehicles on dealers lots. That's because many have cut back on new vehicle delivery as they try to shed costs.
The result, said Oglesby, is that more customers "may not be able to leave with a car today as they could yesterday. ... The selling process is becoming different. You are going to come in and almost order your car. That aspect I like because it takes the pressure off the deal."
Dealers have found other ways to cut costs. They've slashed advertising — an expense that often amounts to several hundred dollars for each vehicle sale. And their payrolls are shrinking, because the sales forces' compensation usually is tied to the amount of profit made on each vehicle.
Rayman said he has already slashed his advertising budget by at least 50 percent compared with a year ago. And the number of salespeople at his dealerships is down 20 percent, he said.
Other dealers have also seen an exodus of staff, either because of job cuts or because shrinking pay became untenable.
There are other difficulties. In hard times, dealers often look for ways to milk more money from used car sales, which tend to offer higher profits. But for many dealers, that area has soured also.
Mike Sobh, a general manager for his dad's Lou Sobh Pontiac, Buick, GMC, Hummer dealership in Duluth, Ga., said he has watched sales plummet from a healthy 240 new and used vehicles a month to 140. Lou Sobh has dealerships in other states, but sales of big vehicles have been particularly slow locally, the son said. He cited the problems in the construction industry, which had been a crucial component of the Atlanta economy.
The dealerships cut support staff and consolidated back office functions of three local dealerships, Mike Sobh said. But even with the tough times he said he's been careful not to change sales tactics to get more people to buy.
"This will turn around," he said. "We are not going to sacrifice our name."
Oglesby, 61, has seen lots of industry pain before. He was a young finance manager at a Pontiac and Cadillac dealership in the 1970s when an oil embargo sent sales of big cars into a deep dive.
The dealership slashed its sales force and Oglesby had to pull double duty working the sales floor. The result: He made more money.
"There's always business out there," he said, "if you have the belief system that, if somebody is going to buy a car, they are going to buy from me."
Matt Kempner writes for The Atlanta Journal-Constitution. E-mail: mkempner AT ajc.com