The Auto Writer

Auto dealers and suppliers are also feeling the effects of the current economic crisis. According to Sageworks data on private companies, the financial standing for many of these companies is downright precarious. To read graph clearly, please click on the picture for a full sized view.

The bad times for GM and Ford trickle down to auto dealers and suppliers

Last week The New York Times reported that J.D. Power & Associates cut its forecast for United States motor vehicle sales for 2008 to 13.6 million vehicles, a 16%  year over year decline from 2007, adding that 2009 sales could fall even further to as low as 13.2 million units. This news resulted in a plummet in the stock prices for both General Motors and Ford, but they aren’t the only ones suffering.

Privately owned automobile dealerships seem to be experiencing similar challenges to that of the American auto manufacturing giants. An analysis of Sageworks data on private companies in the “auto dealers” and “other motor vehicle manufacturing” industries shows that over the last 12 months alone, both of these industries have dropped to the bottom 5% of all industries in the database by all 4 borrowing/debt ratios that are tracked.

The metrics analyzed include debt service coverage, interest coverage, debt to EBITDA, and debt to equity. This indicates that the restricted borrowing environment resulting from the current credit crisis may have a particularly dire effect on the auto sales industries.

Negative Growth For 2008 So Far

Not surprisingly, sales growth for automobile dealers has gone from +2.37% in 2007 to -1.83% in 2008 thus far. According to Sageworks data on private companies, sales of auto dealerships have not experienced a decline since the data began being collected in 2000. Additionally, cash as percent of total assets has decreased from 8.53% in 2007 to 6.99% in 2008.

Motor vehicle parts and supplies wholesalers have also seen a huge sales decline since 2007. Sales grew at an average of 0.7% in 2007 and have declined at an average rate of 11% in 2008. A graph depicting sales % change for auto dealers and wholesalers from 2000-2008 is shown above.

Clearly, the auto industry is suffering on all levels from manufacturers, to suppliers, to local dealers, and beyond.  Some of the money set offered by the federal government for loans will help GM, Ford, Chrysler, and auto suppliers, but for dealers they’ll have to think of ways to ride out this storm.

(Source: Sageworks)