The Recession, Most Would Say, Is Already Being Felt : Auto Dealers Fighting Over Shrinking Pie

John Campbell is president of the Campbell Automotive Group, which operates seven auto dealerships in Orange and Riverside counties. Together, the dealerships sell 11 makes of new cars.

“Business is very, very difficult. It’s the most difficult I’ve seen it in 12 years I’ve been in the business. This is a function of two things. We’re in the middle of an industry recession, which is due to all the new entries in the marketplace--the Acuras, Saturns, Daihatsus, etc. The total number of car and truck models (has) doubled in the past year, but the total market has not increased. We have a pie the same size being sliced in ever smaller pieces.

“That has reduced margins and sales, but costs are increasing faster than usual in our industry because of real estate and because of environmental costs. Our industry has been hit hard by the costs of hazardous waste because we deal with gas and oil. Profitability is very difficult.

“On top of that, we have a general recession, and it is making it that much harder. We’re in for as tough a period over the next 12 months as the car industry has had since World War II.

“Our industry is often highly leveraged. One of the challenges will be to reduce that leverage and be in a good capital situation going in. The other will be keeping costs under control and doing whatever restructuring one needs to do. And I think dealerships will have to be sold, closed or consolidated. There’s not enough market around to support all the models that exist.

“A lot of people are trying to hold dealerships together, staying together hoping for the turn. But I think we’re being double barrelled by a bad economy and some structural factors in our industry that (are) going to make the turn quite a way off.”