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The Honolulu Advertiser
Posted on: Thursday, December 11, 2008

HAWAII AUTO SALES DECLINING
Hawaii auto dealers slash 750 jobs amid plunging sales

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By Greg Wiles
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Auto dealerships in Hawai'i generated $2.79 billion in sales last year and employed more than 5,100 workers. Through the first nine months of this year, car sales have dropped by 20 percent.

GREGORY YAMAMOTO | The Honolulu Advertiser

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Hawaii news photo - The Honolulu Advertiser
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The downturn in the state's economy is putting the brakes on new car dealership employment, with an estimated 15 percent of Hawai'i's dealer workforce, or 750 people, being laid off this year.

Moreover, the Hawaii Automobile Dealers Association believes that number could double to 1,500 people or more if an automobile industry rescue plan isn't enacted in Washington.

Dealerships are reacting to a slowdown in car sales this year as consumers tighten their budgets in the face of credit market worries, Wall Street volatility and a series of setbacks to the Hawai'i economy that have left thousands unemployed and pushed up unemployment to near a seven-year high.

Through the first nine months of this year, car sales tumbled by 20 percent.

"Business is horrible," said Mike McKenna, owner of Mike McKenna Windward Ford in Kailua, who has been in the automobile business for four decades.

"It's the worst time I've ever seen."

McKenna said he believes people who previously might have been buyers are watching their money and aren't buying unless they need to have a car. As such, he's cut his staff by 40 percent and has further cut costs by putting office workers on a four-day work week and reducing manager pay by 10 percent.

The 77 dealerships represent a significant part of Hawai'i's retail community, last year generating $2.79 billion of sales and employing 5,105 workers who earned an average of $971 a week, according to the dealer group.

The downturn is slicing into some of those numbers, with the dealer association projecting at the end of October that 2008 vehicle sales will drop by more than 12,000 units compared with last year, when 57,5261 vehicles were sold.

Other businesses in the state are experiencing similar setbacks and are laying off workers. Among dealerships, Servco Pacific Inc. last month announced it was laying off 118 workers, most of which were at its automotive division; Jackson Auto Group closed its Jackson Lincoln Mercury Isuzu dealership near Honolulu Airport at the end of August.

David Rolf, executive director of the dealers group, said many are working hard to keep operations intact and trying to get the word out that there is plenty of credit available for buyers and that shoppers should expect to find bargains and plenty of inventory to choose from.

Still, these are tough times for the automobile industry.

A Maui meeting of 24 automobile association executives and sponsors was canceled this week because of the downturn, Rolf said. Hawai'i car sales this year are expected to be the among the lowest annual totals in two decades and are having an effect on other businesses. The association has noted that a drop of 20,000 car sales in two years represents $10 million in lost advertising for local newspapers and other markets.

LOOKING FOR A BOOST

The dealers hope the economy will turn soon and that lower gasoline prices will bring buyers back into showrooms. Bill Wiltshire, general sales manager at Honolulu Ford Lincoln Mercury, said the majority of what was sold last month were light trucks or SUVs.

"We're starting to see some improvement," said Wiltshire, who added that he is looking to hire two or three sales people. He said the dealership staff had shrunk by 10 percent or so as people left and the company held the line on hiring.

"We had some attrition due to retirement and some of those things," said Wiltshire, who noted his dealership's sales are down less than his competitors.

Said McKenna, "I don't think they're (sales) going to get worse. I think they're starting to level out."

Some local dealerships are nervous about what happens with a $14 billion rescue package for the automobile industry that's currently being considered by Congress. If the automakers were to file for bankruptcy — something Wiltshire said isn't likely in Ford's case — the public could pull back from buying U.S. cars because of worries over warranties and other concerns.

The Hawai'i dealer group has been lobbying the state's Congressional delegation as well as sending letters to President-elect Barack Obama and Gov. Linda Lingle detailing some of the fallout locally should the automakers collapse. That information notes that out of 77 dealerships here, some of which sell multiple makes, 59 have Big Three related franchises.

Rolf said some dealers are anticipating a difficult first quarter and estimates a further drop in statewide vehicle sales next year.

But "a lot of it depends on what's happening in Congress," he said.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.