Auto dealer hopes for answers to franchise removal
Northern Nevada Business Weekly
The owner of Carson City Nissan supports a process that would provide background about how vehicle manufacturers decided to eliminate thousands of dealerships this year.
A bill that worked its way through Congress and was signed by President Obama could allow for the return of franchise rights to auto dealers who had their dealership rights terminated earlier in the wake of second-quarter bankruptcy filings by Chrysler and General Motors.
An appropriations bill signed into law on Dec. 17 contains provisions to offer arbitration to dealerships affected by GM and Chrysler’s decisions to terminate nearly 3,000 dealerships across the country. Chrysler dealerships were given about three weeks to wrap up sales, while GM dealers were given until October of 2010 to wind down operations.
In Carson City, Chrysler’s decision to eliminate 789 dealerships effectively halved the potential revenue stream of Carson City Nissan, which carried the Jeep line. Franchise rights for the area were left solely with Carson Dodge Chrysler, which sits just two-tenths of a mile away on South Carson Street.
Carson City Nissan owner Jeff Woodward, who purchased the Carson Jeep Nissan dealership 11 years ago, is eager to see an arbitration process that spells out why certain dealerships were eliminated. He says his Jeep line was profitable and he also scored in the top 24 percent of all Chrysler dealers for sales and customer satisfaction.
“I’ll finally be able to find out what criteria was used by the manufacturers to determine which dealerships were cut,” he says. “I’m sitting here six months later and still have never received any indication of why we were chosen.”
The net effect of losing his Jeep franchise, Woodward says, is that the federal government and Chrysler took away 50 percent his business without any compensation. Carson City Nissan was unable to sell its new Jeeps – it had to unload them to other dealerships – and could no longer perform warranty service work on the Jeeps it had already sold.
Woodward says disposal of the vehicles was easy since there was a general shortage of Chrysler vehicles at the time. The issue wasn’t about a profit or loss on those automobiles, he says, but rather about the loss of the franchise asset and its value, something he owned when he purchased the dealership.
“In America this should not have been allowed to happen,” Woodward says. “If we had done something wrong I might understand it better, but we were profitable and we took excellent care of our customer base.
“This has not affected my faith as an auto dealer, but my faith as an American citizen. The government took the assets of approximately 3,000 individuals without compensation and in many cases handed those assets to other individuals.”
Wayne Frediani, executive director of the Nevada Franchised Auto Dealers Association, says some of the affected dealers may have their franchise rights restored.
“I think it is a positive step,” Frediani says. “Enacting the legislation will at least give a number of dealers interested in getting back their franchises a fair and reasonable opportunity to get back in business or stay in business if they are still operating.
“It’s likely to lead to some reinstatements, but I don’t know if there will be a lot of dealers being reinstated.”
Woodward says he didn’t have to reduce employment at Carson City Nissan due to staff reductions already enacted as statewide auto sales began slumping due to the economic slowdown.
Frediani says that statewide auto sales are down 30 to 40 percent from 2008, and as a result the state’s auto industry has laid off about 30 percent of its staff in the last two years.
“I have been representing this industry for 22 years, and this has been the most challenging year dealers statewide have faced,” Frediani says.
Don’t look for pressures to ease too much in the coming year, either, he cautions. National predictions call for a 10 to 15 percent uptick in auto sales, but those predictions may not hold true for Nevada, he says. The state’s high unemployment and foreclosure rates may lead to another stagnant year for auto sales.
“The biggest issue affecting the car industry is jobs,” Frediani says. “We need to get people back to work so that they can afford to buy a car. We need to get people back to work in Nevada.”