Running on Empty
Local car dealers are idle while awaiting their fates.
The Saturn, built by General Motors in Spring Hill, Tennessee, was supposed to be a different kind of car from a different kind of car company when it was launched in 1990.
And for a while it was, building such loyalty that owners flocked to homecoming picnics and boasted of racking up 200,000 miles or more on their odometers.
Now GM is in bankruptcy, pruning more than 2,000 of its dealers and selling some of its brands. Saturn's fate is uncertain, but even if it is acquired by Detroit businessman Roger Penske, it won't be built in Spring Hill, which was idled indefinitely by GM in June.
Russell Gwatney owns three Tennessee Saturn dealerships in Jackson, Germantown, and Memphis. His family has been in the car business with GM for 51 years, and Gwatney has been selling cars in Memphis since 1989. Drew DePriest, owner of All-Star Chevrolet in Olive Branch, Mississippi, has also been in the business nearly 20 years. The bankruptcy of an American icon with a first-quarter loss of $8 billion is a hard story to get your arms around, but the experience of GM dealers like Gwatney and DePriest puts a human face on it, suggests what went wrong, and hints at where the car business is going.
"Dealers are the customers to GM," says Gwatney. "Dealers buy the cars and sell them to the people. I don't think anybody was prepared for the depth of what happened."
"It's a whole lot tougher than what we thought it would be," he says. "Fortunately we had shifted toward used cars a long time ago. The used car business is pretty decent. And the truck market is still good, especially in rural areas."
On the Monday that GM declared bankruptcy, several of DePriest's employees got together to watch the historic news.
"It was kind of like the new Camaro finally getting here," says DePriest. "We already knew what it was going to look like."
The Gwatney family's half century with GM neatly spans the transformation of the family car from station wagon to mini-van to SUV to crossover.
"All of those vehicles had their purpose," says Gwatney. "They've been criticized for being gas guzzlers, but when you look at all the dual-income families and kids playing soccer and moms sharing driving duties, there is not a small vehicle that is going to take that number of children or a family that size on a road trip."
He offers several explanations for what went wrong — too many look-alike models, too many dealers cutting up the same pie, the credit crisis of 2008 — but the root of the problem, he believes, goes back to the five or so years after World War II. Having defeated Germany and Japan, America helped rebuild their economies and saw them become competitors with hot-selling Volkswagens, Toyotas, and Nissans. At home, GM and Ford made promises on health care and retirement that were realistic when people retired at 65 and died soon after, but proved fatal when workers retired at 50, life expectancy increased, and health costs soared.
"Without question, GM's biggest problem is that it is one of the oldest companies in America," says Gwatney.
He thinks the GM brand will survive "but will never be the company that it once was." And Covington Pike, the auto row where Gwatney once owned an Oldsmobile and Chevrolet dealership, will be "a viable point for sales" despite dealers closing, consolidating, and moving to Wolfchase and suburban sites.
A week after the bankruptcy, the identity of the dealers who were cut by GM still was not known. DePriest believes the Obama administration, aka "Government Motors," might bring back some of them if the economy turns around.
"Somebody in the Memphis area has to be out," he . "I've heard rumors, but the GMAC reps don't know and don't want it known publicly. Neither do my sales reps."
Gwatney said he doesn't know either, but he regrets the demise of, first, locallyowned banks, and now the dealer system.
"Those economic engines contributed an awful lot around the country and in Memphis."