READY TO ROLL

Area dealers have invested in new facilities, convinced that new-vehicle sales will increase

By Terry Box (Dallas Morning News April 24, 2001)

From some points on the prairie, North Texas' rock-solid new-car market suddenly looks a little rocky.

In a highly unusual drop, new-vehicle sales in the Dallas- Fort Worth area declined 5.3 percent in the first quarter - the first quarterly decline in nearly a decade.

Consumer confidence, even in ever-optimistic Dallas, seems to be wavering, dealers say. And some dealership lots are crowded with unsold inventories of new cars and trucks.

But new-car dealers are as optimistic as ever - and perhaps for good reason.

The auto industry led the nation's manufacturing sector into the current slump when it began reducing production and laying off workers in January, economists and industry analysts say. Automakers have since been able to reduce their inventories, and many are resuming normal production schedules.

As a result, the auto industry may be poised to lead a rebound in manufacturing - and maybe the overall economy, they say.

"Our industry is in good shape," said Paul Taylor, chief economist with the National Automobile Dealers Association."I'm saying we'll sell 16.3 million [new vehicles], and I'm sticking with it because I think the economy has the fundamentals to support it."

The view from Carl Sewell's office north of downtown Dallas is also pretty good.

Over the next year, Mr. Sewell is planning more than $10 million worth of projects, including new facilities for his Infiniti and Cadillac dealerships in North Dallas, a new "pre-owned center" for used-vehicle sales at his Lexus dealership in Dallas and a big new body shop near Love Field.

In addition, Mr. Sewell is adding a Hummer franchise at his Sewell Village Cadillac dealership in Dallas.

"If this were Cleveland, we might not be doing this," said Mr. Sewell, chairman of Sewell Automotive Cos., which includes two Cadillac, two Lexus, an Infiniti, GMC truck, Pontiac, Oldsmobile, and Saab Dealerships in the Dallas - Fort Worth area. "But we feel great confidence in the economy in Dallas - Fort Worth."

So do many other new-car dealers in the Dallas area, some of whom are planning, working on or have just completed new dealership facilities - despite a local economy that appears to be slowing.

For years, the auto industry has slumped or grown stronger before the economy as a whole does, said Albert Warner, director of the Motor Vehicle Division at the U.S. Department of Commerce.

"It generally leads because it is an interest-sensitive sector and, to an extent, interest rates determine sales," Mr. Warner said. "Ten or 15 years ago, you could call the auto industry a leading indicator of the economy. Today, with incentives and rebates, it's more complicated."

Like many economists, Mr. Warner said he had expected the auto industry to have a worse first quarter than it did. Sales nationally were down 4.2 percent in the first quarter from the same period in 2000.

"I'm amazed," he said. "I can't answer it. I don't think most people know where the demand is coming from."

Typical Reaction

Car dealers react to slumps the same way other businesses do. They cut costs and postpone capital projects. And many dealers in the Dallas area have done just that.

But they also believe that new-car sales for the rest of the year - particularly in the third and fourth quarters - could be almost as strong as they were in 2000, a record year everywhere.

"Don't be fooled," said Drew Campbell, president of the New Car Dealers Association of Metropolitan Dallas. "Sales are great right now.

"Even though we're down 5 percent, 5 percent off of last year's pace is still the second-best sales year ever in our market," he said. "And I think we will probably see sales pick back up in the second quarter."

If the auto industry does sell 16.3 million vehicles this year, it would be the third-best sales year in history.

Although the economy in North Texas has shown weaknesses - the tech sector, for example, has suffered thousands of job cuts - dealers in the Dallas area expect to contribute heavily to the national sales total, Mr. Campbell said.

"We had the best retail month in our history in March," said Jerry Reynolds, managing partner of Prestige Ford in Garland, the largest new - car dealership in the state.

And dealers nationwide are fairly upbeat, judging from their comments at a recent Ford Dealer Council meeting, said Mr. Reynolds, who is national chairman of the council.

"I think a lot of them expect to have a pretty good year," he said.

Car dealerships are high-cash-flow, low-profit enterprises - the average profit nationally is now 1.4 percent of total sales, down from 1.8 percent in 1999, according to the car dealers' association.

Votes of confidence

All the current dealer projects are a strong vote of confidence in the local economy, Mr. Campbell said. They include:

• Mr. Sewell plans to move his North Dallas Cadillac dealership to Grapevine. He has purchased a 15-acre site on the south side of State Highway 114 near Minters Chapel Road, and the new facility should be open by May 2002. The dealership is currently in a leased facility on LBJ Freeway west of the Dallas North Tollway that Mr. Sewell inherited when he bought Meier Cadillac in October 1998.
• The former Rodger Meier Infiniti, which Mr. Sewell purchased along with Meier Cadillac, will be moved to a three-acre site near the intersection of Lemmon Avenue and University Boulevard. Like the Cadillac facility, the new Infiniti dealership is expected to be open in May 2002. The Cadillac and Infiniti dealerships will remain at their current sites until the new facilities are completed, Mr. Sewell said.
  
• Mr. Sewell also is converting an 83,000-square-foot building at Cedar Springs Road and Manor Way into a body shop that will serve most of his dealerships and is completing construction on a new used-vehicle facility for his Lexus dealership. It is located off Lemmon Avenue on Haggar Way.
  
• One of Sewell's competitors, Massey Cadillac in northeast Dallas, is moving from its leased location near Northwest Highway and Garland Road to a 6.5-acre site on LBJ Freeway. The dealership hopes to break ground on the site near the Kingsley-Jupiter roads exit next month and be in a new 55,000 - square-foot facility by next May, said Ken Dillon, general manager of the dealership. He declined to say how much the new facility will cost but acknowledged that it will probably be more than $5 million. "We want to give Dallas a Cadillac dealership they can be proud of," Mr. Dillon said.
  
• Another of Mr. Sewell's competitors, Park Place Motorcars Mid-Cities in Bedford, is in the midst of a multimillion-dollar renovation and expansion. When the Mercedes-Benz complex off Airport Freeway and Industrial Boulevard is completed this summer, it will have a new customer waiting area, an expanded showroom, larger parking areas, and a new used-vehicle sales facility. "We are very confident in the long-term economic strength of Northeast Tarrant County," said Ken Schnitzer, chairman of Park Place Dealerships, which includes Park Place Motorcars in Dallas, Park Place Lexus in Plano, Park Place Audi and Park Place Porsche in Dallas, and Park Place Lexus in Grapevine.
  
• Frank Parra Autoplex, one of the largest dealerships in Dallas County, is proceeding with construction of a new Dodge Dealership in Grapevine near state highways 121 and 360. Frank Parra Dodge should be open by the end of August, said Thomas Quintana, general manager of the dealerships. He said plans for the dealership were not affected by the area's uncertain economy. "You sail your own ship," Mr. Quintana said. "Even if the water is rough, you can still reach you destination."
  
• AutoNation Inc., one of the largest dealership groups in the area, has completed work on Bankston Chrysler-Jeep in Frisco. The new dealership opened in early April on a 12-acre site next door to one of AutoNation's other dealerships, Bankston Ford of Frisco. Both dealerships are off Highway 121 just west of the tollway. Jim Heckert, regional manager of AutoNation, has also broken ground on a seven-acre site in Grapevine where the company plans to construct a new facility for Payton Wright Ford. The dealership is now located off Highway 114 and Main Street.
  
• The Huffines Dealerships, the largest new-car group in Collin and Denton Counties, recently opened a new Dodge dealership, Huffines Dodge, in Plano at Plano Parkway and Ohio Drive. The dealership opened earlier this month on a 22 -acre site, said dealer principal Ray Huffines, who also oversees Ray Huffines Chevrolet and Huffines Chrysler - Plymouth-Jeep, both in Plano. "If we were worried about the economy, we would have been conservative and wouldn't have built it so big," Mr. Huffines said.