Guest Columns

JACKSON: AUTO MANUFACTURERS DEPEND ON DEALERSHIPS

Auto dealers a pillar of Colorado’s economy

Automobile dealers and automobile manufacturers have a symbiotic relationship. Put simply, neither could survive without the other.

The automobile dealers need the manufacturers to succeed or they won’t have any product to sell. Meanwhile, the dealers provide the manufacturers a huge distribution network and the necessary link to the consumers.

In these incredibly tough times for the automobile industry, the Colorado Automobile Dealers Association has been energetically advocating for policies that will support manufacturers, including the Big Three U.S. automakers. The last thing we would want to do is undermine the industry that is so vital to our success and the nation’s economy.

But these are extremely tough times for auto dealers, as well. Nationally, about 900 franchised dealerships closed in 2008, reducing the U.S. total to about 19,000. Another 1,100 dealerships are expected to close in 2009. Closer to home, five Colorado dealerships closed in 2008 and one more has closed already this year.

That translates to lost jobs — and lost careers — for Colorado citizens.

We need to ensure that manufacturers and Colorado automobile dealers interact on a level playing field. That’s in the best interests of the entire state, and that’s the bottom line of Senate Bill 91, sponsored by Sen. Chris Romer, D-Denver.

According to an analysis of economic impact of new vehicle dealers on Colorado in 2007:

• The retail automotive industry generated nearly 30,000 jobs in the state, with the average dealership providing jobs for 73 people.

• Colorado residents earned more than $1.5 billion as a result of automobile dealership operations.

• Colorado automobile dealers (through taxes collected or paid) generated more than $418 million in revenue for the state and local governments. In fact, sales of new and used cars, as well as parts and service, are the single largest source of sales tax revenue for almost every state, city and county government nationally.

• Colorado dealerships contributed more than $6.1 million to charitable causes.

Nationally, franchised automobile dealers have $233.5 billion invested in their businesses, or an average of $11.3 million per dealership, according to a November report prepared for the National Automobile Dealers Association.

The report, by New York consulting firm Casesa Shapiro Group, concludes: “Far from being a burden to the manufacturer it represents, the automobile dealer supports the manufacturer’s efforts by providing a vast distribution channel that allows for efficient flow of the manufacturer’s product to the public at virtually no cost to the manufacturer.”

Dealers pay manufacturers for just about everything, including the signs in front of their stores. Without this revenue, automakers’ assembly lines would screech to a halt.

Automobile dealers are a critical part of Colorado’s economy. But, in these tough times, their success can’t be taken for granted. It’s understandable that legislators would want to ensure auto dealers get treated fairly so they can continue to contribute to the economic vitality and well-being of the state.

Tim Jackson is president of the Colorado Automobile Dealers Association.