Open Forum: Dealer says that U.S. car industry will bounce back

Turner Whitson, owner and operator of the Whitson-Morgan Ford and Chrysler dealerships in Clarksville, concludes our interview on what has happened to the Big Three auto makers and what lies ahead for them.

Downs: Am I correct in understanding that it will be the larger dealers who will be closed rather than those in so-called “rural” areas like Clarksville?

Whitson: Yes. If dealers serving a rural market are maintaining market share, customer satisfaction, a good facility and are well-capitalized, they should be okay. Many of the larger  closings are in metro areas where there may be a Jeep dealer, a Chrysler dealer and a Dodge dealer in the same city. Or a Chrysler-Jeep dealer on one side of town and a Dodge dealer on the other. In the streamlining process, Chrysler wants to create dealerships in which all three are under one roof.

Downs: Some have argued that had government not stepped in with its bailout packages, the markets would have righted themselves. Agree or disagree?

Whitson: Basing my opinion on many years of experience in the business world, I disagree. Had the government not stepped in when it did, I think there would have been a total collapse in the economy, first in the financial system and second in all manufacturing. If General Motors and Chrysler had gone down, many automotive suppliers would also have gone down. That in turn could have impacted Ford Motor Company, Toyota, Honda and Hyundai, and the ripple effect could have brought down the whole economy.

Downs: What will happen to GM?

Whitson: I think GM will have to go into bankruptcy because they won’t be able to shed the debt they now have. They will probably go into the same kind of bankruptcy as Chrysler did —Code 363. Within 30 to 60 days I think they will come out of bankruptcy as a new, streamlined company that will be minus Saturn, Hummer and Pontiac. They will continue to streamline their dealerships. Before the present recession began, GM had 6,200 dealers in the United States. On May 16 it was announced that 1,100 dealerships will not be renewed in September 2010. Because GM was not in bankruptcy when these closings were announced, this will give some breathing room to those dealerships that were not renewed.

Downs: Why is that?

Whitson: Because they know who they are, they will have a little over a year to sell down their inventories and make a graceful exit from the business. But since the closing of the 789 Chrysler dealers was announced when the company was in bankruptcy, they were not allowed by law to buy up dealer inventory.    Downs: This problem obviously has been building up over many years.

Whitson: No question. The capitalistic, free-enterprise democracy is a strong taskmaster that will eventually get things right. I was taught by a very good economics teacher when I was in college that in order for our system to work well, we must walk a fine line between falling off into socialism on one side or raw capitalism on the other. As long as we can stay on that line, we can be very successful. It’s also the best economic system that has every been developed.

Downs: How does this apply to our being in this deep recession?

Whitson: Frankly, for a while, our financial industries fell off the line toward raw capitalism. Consequently, we’ve had to do what some people call some “socialist” things: first, having the government interject money to prevent a financial meltdown. And second, needing the government to establish regulations on the financial industries going forward. But that doesn’t mean we are going to become socialists. It simply means that when we get back on the right line, our economy will improve. That may be as late as 2011 but the automobile industry will bounce back.

Downs: Why so long?

Whitson: Because we’re looking at an economy that was absorbing 16 million new vehicles a year up until 2008 when it dropped down to 10 million. This year is will be 9 to 10 million. Next year, by all reports, 10.5 to 11 million, if we are lucky. But if you take three years of 6 to 7 million new vehicles not being sold in this country means that the scrappage rate is far greater than new vehicles being pumped in. But by 2011, the pent-up demand is going to be fantastic. And these companies—GM, Ford and Chrysler, Toyota, Honda, Hyundai—all of them will be right-sized and in a position to once again be very profitable.

Downs: What’s your message to customers and potential customers about the future of the auto industry in America?

Whitson: I can speak much more knowledgeably about Chrysler and Ford. Ford is doing very well now and will continue to do well because the company is in a good enough financial position to weather the storm. So far as Chrysler is concerned, it should emerge as a streamlined, much smaller company than before that will be very competitive and continue to have very good products.

Next week: Questions, answers, concerns? Contact Bill Downs: downsw@sbcglobal.net.