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ARCHIVED  October 8, 1999

Auto retailers burn up the track

If ever an industry took advantage of all the rising indicators that the Northern Colorado economy offers, it’s the auto-dealership business.

Car dealers are building, remodeling, moving, expanding, buying and selling at an astonishing rate – even by Northern Colorado standards. Zooming sales, fancy new digs, acquisitions and swaps are measures of the high ride that Greeley, Loveland and Fort Collins dealers are on.

Forgive them if they’re too busy selling cars and building new showrooms to do the math: No one knows for certain, but best guesses – bolstered by a Business Report survey of the largest car dealerships in the region – show that the Northern Colorado-southern Wyoming industry will top $1 billion in sales by yearend.

“All of the economic indicators that benefit us, or make us slip, have been very positive,´ said Doug Markley, president of the Fort Collins-based Markley Motors Inc. that has Buick, Pontiac, GMC, Honda and Saturn dealerships stretching into southern Wyoming.

“The economy nationally, and the economy in Colorado in particular, have been extremely good.”

The national numbers, weighed against local figures, paint a picture of just how hot the Northern Colorado market is.

Markley Motors will nudge close to $100 million in sales this year. If the dealership hits that target, sales would have risen 14 percent over 1998’s number and would mark the fifth straight double-digit annual increase, Markley said.

The other regional powerhouses, especially those in Fort Collins, are reporting similar sales jumps.

The National Automobile Dealers Association says its members will sell a record number of cars and trucks this year – 16.8 million. That’s up 7.6 percent from 1998, and the biggest annual increase in the last decade, but its still about half the growth rate that many Northern Colorado dealers are posting.

“Nationwide it’s great, but not quite as exponential as what’s going on in Northern Colorado,´ said Mike Morrissey, spokesman for the Virginia-based NADA. “You’re in a very high-growth region, and those numbers aren’t the same ones you see around the country.”

Flush with profits from rising sales, dealerships are also adding space to their operations. For example:

” Greeley auto dealer Wes Taber earlier this year spent $2 million relocating Honda of Greeley to a 20,000-square-foot showroom and service complex on six acres of land at 47th Street and U.S. Highway 34 in west Greeley.

” Just to the north, Garnsey & Wheeler Ford is in new space on the U.S. 34 Bypass. The dealership’s 50,000-square-foot building is on seven acres, compared to the acre the dealership left behind in downtown Greeley.

” Pedersen Toyota-Volvo in Fort Collins now sells Volvos from a gleaming, 30,000-square-foot complex that owner Jerry Pedersen spent $4 million to build and open in January.

” Dellenbach Chevrolet-Oldsmobile-Cadillac and Markley Motors in Fort Collins are both in the process of building and remodeling, hoping to open new showrooms by year’s end.

Along with the new space come new jobs: “We’ve added 40 people in various areas over the past two years,” Markley said. Pedersen has doubled its work force since 1994, and now employs 95 at its Toyota and Volvo locations in Fort Collins.

“It’s a great living for the people in the business,´ said Tim Brynteson, president of Garnsey & Wheeler and of the Greeley Automobile Dealers Association. “Good technicians and sales people are hard to find, and we pay them well.”

The growth also begets growing pains: A labor shortage that afflicts all of Northern Colorado nags at the auto dealers. Expansions are costly in cities where development costs are rising. New technology is forcing dealers to keep up with the ways modern consumers do business. And big, publicly owned dealership groups are shopping for independents to gobble up.

“It’s changing fast,´ said Scott Ehrlich, who this year closed on the purchase of Stampede Toyota, adding the franchise to his Mitsubishi and Nissan holdings in Greeley. “It’s a challenge to keep up with it all.”

The Internet, for example, has meant that dealers see a more savvy clientele in their showrooms – if, in fact, they see them at all. Most have salespeople who do nothing but online selling.

“It’s not going away,´ said Pedersen, who estimates that almost 10 percent of the $46 million in Toyota and Volvo sales he expects to make this year will be closed online. “The Internet is here to stay, and we’re all doing what we can to stay up with it.”

Markley cites a JD Power and Associates report that tells him that “at least 70 percent of the people who are buying new vehicles come in after doing research on the Internet.”

Some dealers, such as Nick Davidson Inc. in Loveland, are less enamored with the online trend, preferring to do as much of their business as possible the traditional ways – with a test drive and a handshake.

“We’re a small business, we’re involved in the community and it pays dividends,” Davidson president Joe Gebhardt said. “Most of our customers want to see, feel, touch, drive. It’s hard to establish a relationship any other way, and our business is still one that depends on that personal relationship.”

Another new wave that is washing over the industry is the rise of public companies – “dealership groups” in the parlance of the business – that are looking for successful dealers to add to their holdings.

Foothills Auto Plaza in Fort Collins was recently absorbed by Lithia Automotive Group, an Oregon-based company whose rise on the New York Stock Exchange since an initial public offering in December 1996 has doubled investors’ money.

Many of Fort Collins’ largest dealerships have been approached by Lithia or other big publics, but most have resisted.

“Instead of being acquired, we are in the acquisition mode ourselves,´ said Chris Spradley, a partner in Spradley Barr Ford in Fort Collins. “We went up and bought Fassett-Nickel in Cheyenne.”

All that prevents Northern Colorado car dealers from being more successful than they are is an inventory shortage that plagues dealers nationwide, but afflicts those in one of the nation’s highest-demand regions even more.

No dealer can speak long about the business without lamenting the inventory crunch, and the fact that short supply could not come at a more inopportune time.

“At our old place we had an acre, and now we have seven,” Brynteson said. “We’ve got space for 300 to 350 new and used cars, but we’re struggling to keep 200. I know we lose sales, because we don’t have the right inventory.”

But if dealers could choose a problem to deal with, it would be sales so brisk that the lot empties as fast as it fills. Projections for continued economic growth are surprising the veterans in the industry, who have ridden the waves through closely spaced peaks and troughs for decades.

“The thing that surprises me is how long the boom has lasted,” Spradley said. “This is about the longest upswing I can remember. It’s been great the past five years.”

If ever an industry took advantage of all the rising indicators that the Northern Colorado economy offers, it’s the auto-dealership business.

Car dealers are building, remodeling, moving, expanding, buying and selling at an astonishing rate – even by Northern Colorado standards. Zooming sales, fancy new digs, acquisitions and swaps are measures of the high ride that Greeley, Loveland and Fort Collins dealers are on.

Forgive them if they’re too busy selling cars and building new showrooms to do the math: No one knows for certain, but best guesses – bolstered by a Business Report survey of the largest car dealerships in the…

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