Q&A: Car dealership survives recession, hopes for future

imageThe past two years have seen both the decline and resurgence of American car companies. Don Chou, who owns a General Motors (GM) car dealership in South Los Angeles, has ridden those waves, seeing his sales decrease dramatically and then begin to steadily rise again.

Located just a few blocks from the University of Southern California, Don’s Auto Sales sells for new and used GM vehicles. It is a family business, as Chou’s wife works alongside him as the dealership’s Chief Financial Officer and the vice president of Human Relations. The dealership employs 10 people.

Chou said many of his customers live within a two-mile radius of the dealership.

While memories of inventory and financing problems are still fresh, Chou told Intersections South LA’s Qinyuan Chen that he is hopeful for the future of GM and of his dealership.

Qinyuan Chen: Two years ago, the United States faced a financial crisis, which resulted in the collapse of some of its big automakers including GM. How did it affect your business?

Don Chou: It really hurt. We used to have no cars in our inventory in 2009 and early 2010 because General Motors went through bankruptcy. Not a single car in inventory, can you imagine that? We lost about 40 percent in sales in 2009, just because we had nothing to sell. Also, since there was a shortage in supply, wholesale price went up. Some dealers stopped selling GM cars and turned to other brands. People came to us for cars, but we just had nothing to sell.

QC: What about finance, then? I know dealers buy cars from manufacturers with large “floor plan” loans from a bank or finance company. Did you have any trouble getting loans?
(Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. The borrower then repays that debt as they sell their inventory and borrows against the line of credit to add new inventory.)

DC: Yes, we did. GMAC—which is now Ally—used to be our sole source for floor plan loans for the inventory, but it suspended financing a number of dealers when GM went bankruptcy. We had to find alternative sources for money. Bankers were reluctant to floor plan our inventory because they thought that market was weak.

QC: What about your customers? How were their loans affected?

DC: GMAC finances our customers for their purchase. The interest rate hit a historic low on car loans. On average, interest rates on a four-year loan for a new car is about 6 percent. Some lenders these days offer rates as low as 3 percent. This is the lowest rate that I’ve ever seen since I started the business.

QC: The Associated Press reported last week that new car and truck sales reached 11.6 million nationwide in 2010, up 11 percent from the previous year. What do you think of this number?

DC: This is a good sign for us. Actually, we have seen that the volume has picked up considerably in sales and inventory. GM started to put out new products and launched a marketing campaign that is pretty aggressive. We don’t even have the Chevy Volt (the all-electric car) in our showroom because it’s already been sold out. As soon as it comes in, it’s sold.

QC: Do you see any changes in preference when people choose cars for personal use?

DC: Gas prices are going crazy. More and more, people prefer four-cylinder cars to six-cylinder. Chevy Volt is very popular. Besides that, we have the Chevy Cruze, which is a very popular car among young people. It’s good-looking, affordable and gas-efficient.

QC: What’s your expectation to for the future?

DC: In the last a couple of months, we are happy to see sales going up again. And as GM comes with more and more cool products—like Chevy Volt, Malibu and Cruze—I think we will have a much better year.

QC: By “a much better year,” you mean…?

DC: That sales increase by 15 to 20 percent, if not more. I’m pretty sure about this.


  1. Most likely you spend thousands of dollars on advertising and marketing each month to bring the customers in, but if they don’t stay at your dealership you’ve not only lost them forever – you’ve wasted a great deal of money. You need to play the game and improve owner loyalty, complete the buying circle and form a unity between sales and service now. It requires the cooperation of the entire dealership to provide a customer with an experience that will ensure their return. The times are tough and now more than ever we need to form a truce between both departments. Today, dealerships are forced to rethink their methods of doing business and these are some clear problems that need addressing. Regardless of what the newspapers say, you can still operate a very profitable business. The real key is to not think of how terrible business is, but to instead think of how much more business you can generate as the competition around you falls and you stand united and strong. Teach your dealership how the two divisions can become one and work together to mutually benefit one another. A dealership can either stay divided and die or come together and prosper. Where does your dealership stand?
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  2. car paint repair says:

    I think dealerships should reduce prices. Consumers overpaying way too much. But its my opinion.

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