“Residents of the Bay Area, and the country, have been gripped by fear. And when people are afraid, they don’t buy cars,” Wesley Harris, sales manager at Dirito Brothers Walnut Creek, tells Nardi.
“People are just scared to death,” continues Harris, who has worked at Dirito Brothers for 16 years. “It’s a struggle to sell cars. Until people feel confident they can keep their jobs, the car industry is and will be a matter of survival.”
Nardi sums up: Dealerships’ survival also affects residents in cities where tax revenues from auto sales have padded city coffers for decades. City leaders across the East Bay are sounding the alarm, as drops in that key source of revenue have helped prompt cuts in city job rolls and figure to result in municipal service cuts down the road.
This comes in the week that grim economic news came out of a conference Thursday held by the Association of Bay Area Governments. Essentially, what we’ve pretty much already heard, things are going to get worse before they get better. The Bay Area economy is expected to deteriorate until the third quarter of 2009 (July-September period), and a rebound is not expected until 2010, an economist said at the conference.
Meanwhile, back to auto sales. Some key facts Nardi cites:
–In Contra Costa County, new car vehicle registrations are down 25 percent from last year.
–In dealer-heavy cities such as Concord, auto sales reports show sales are down nearly 25 percent from mid-2007 to mid-2008. In fiscal year 2006-07, Concord’s auto and transportation sales tax revenue was $7.1 million; in 2007-08 that number dropped to $6.2 million. Already this year, all sales tax revenue is 16 percent lower than what city leaders predicted last summer.
— About 30 percent of the $20 million total sales tax revenue in Walnut Creek (my hometown) comes from auto sales. So far, aside from a Pontiac dealership that went out of business — since replaced by a Smart Car dealer — Walnut Creek has not seen any of its 13 dealerships close, [said City Manager Gary Pokorny].
–But that business [in Walnut Creek] has slipped, too. According to car sales data, new vehicle sales by dealerships in Walnut Creek from January through November 2008 were down 23 percent from that same time period last year.
–As dealers watch their bottom lines skid into the red, cities grapple with the loss of revenue. In Walnut Creek, when city employees have left, most have not been replaced. Creating a list of service priorities and making cuts based on that will probably be next, Pokorny said. This year’s budget called for a 2 percent drop in sales tax revenue, but in reality he expects a greater plunge.
Nardi notes the following dealerships that have closed or will close soon:
Those already closed include Ford dealerships in Dublin and Oakland, a Volvo dealership in Pleasanton, and a Dodge dealership in Brentwood. The Diablo Lincoln-Mercury on Market Street in Concord is due to close February 28.
Read more about this latest challenge in our local economy in Nardi’s story.