Sunday, January 4, 2009

So the question is why do car dealers in Australia make very little money and the profits that they do make, come from the management of the money in their float. I had this very conversation with the owner of a number of dealerships last year, it looks like the answer may have been able to be found in Australia at least a year ago. If someone had looked maybe the following article from Wall St Journal would not apply to them.

LONDON, Ky. -- Neither Johnny Watkins nor Elmer Gambrel had much growing up in southeastern Kentucky. Mr. Watkins's farm home had no indoor plumbing and he plowed the fields without a tractor. Mr. Gambrel, also a farm boy, joined the Navy after school and worked at a gas station.

But both had a knack for selling cars, and both eventually built thriving dealerships, bringing them wealth their parents never knew. With the profits, Mr. Watkins bought a Florida beach condo and Mr. Gambrel a plane.

That's where their business careers diverged. Today, Mr. Watkins's two dealerships, selling vehicles from General Motors Corp. and Chrysler LLC, are closed, his condo is gone and his house, now owned by a bank, has yellow-and-red "For Sale" signs out front. But the Toyota dealership that was started by Mr. Gambrel, who died in 1991, continues to provide a good living for his four children.

Tyler Bissmeyer for The Wall Street Journal

A Tale of Two Dealerships

See photos from London, Ky.

For decades, selling cars from Detroit paved a path to wealth for businesspeople in cities and towns all across the country. Even if the auto makers were hurting, the dealers typically did all right because sales incentives financed by the makers supported sales. But the American auto industry has never before faced the kind of forces now slowing sales to a crawl. They include tight credit, rising unemployment, home foreclosures and a widespread public mood of hunkering down and spending less.

Aivars Lode