Staying power: Poulsbo's Auto Row hopes for good times ahead

Rick and John Hern, owners of Courtesy Auto Group, are weathering the storm. - Brad Camp/Staff photo
Rick and John Hern, owners of Courtesy Auto Group, are weathering the storm.
— image credit: Brad Camp/Staff photo

POULSBO — It’s clear to even the untrained eye Poulsbo’s Auto Row has taken its share of hits in the last months. Swaths of empty pavement have emerged along Viking Way with increased frequency, as retailers and wheeled goods appear fewer and farther between.

It isn’t news to many: Nationwide the auto industry is facing monumental shortfalls in these abysmal economic times. General Motors reported this week its U.S. vehicle sales plunged 49 percent in January, while Ford’s sales dipped 40 percent. Toyota, Nissan and Honda all saw decreases as well, putting the overall industry at its fourth consecutive month in which sales have dropped 30 percent or more.

On Poulsbo’s Auto Row, signs of struggle became obvious last September when long-established business Poulsbo RV rolled out of town, taking with it a fleet of recreational vehicles. At the time, Poulsbo RV marketing manager Tony Labriola chalked the shut down to a changing market and decreased buyers. Gas prices soared and spending became uneasy, sending the company packing from its flagship location.

The same petroleum-based influence was made prevalent throughout the country. Last year, the North American International Auto Show unveiled a testosterone-laced Dodge Ram; this year electric cars took center stage.

An estimated net loss of 700 car dealers occurred in the United States throughout 2008; 900 or more are predicted for 2009, according to the National Automobile Dealers Association. Even used auto dealers, traditionally more profitable, are seeing losses in the books. With all the plummeting car values, the Kelley Blue Book, formerly updating every month, is now updating prices by the week.

It is fluctuations as these that have kept the industry in the national spotlight, and raise questions as to how flailing sales, manufacturer bailouts and new technology affect dealers close to home.

A local perspective

Like many of its neighbors, Viking giant Courtesy Auto has also left some empty pavement behind. But its owners, John and Rick Hern, say vacant lots don’t always spell trouble. In fact, staying positive is something to which they wholeheartedly adhere.

“Is our business as good as it was two or three years ago? No, because the economy isn’t,” John explains. Courtesy Auto has consolidated staff positions and locations; some employees have volunteered cuts in hours to keep their jobs, while others work long shifts at stores open seven days a week.

Still, when asked about the difficulty of sidestepping economic pitfalls day after day, John gives a surprising answer.

“It’s a lot of fun,” he says. “In hard times like this you have to maintain a positive mental attitude, and that has to come from the top.”

John opened his lots in 1982, at a time when interest rates rocketed to 22 percent, Viking was only a two-lane road and Silverdale didn’t exist.

Rick, John’s son, points out those weren’t easy days either, but the business prevailed then just as he believes it will today.

“We’re fighters,” he notes, sitting fittingly in a Courtesy boardroom below a framed still of Muhammad Ali in action at the Thrilla in Manila. “We’re going to do the same thing now.”

Nationwide rising unemployment, weakening consumer confidence and elusive lending have made trouble for manufactures. GM and Chrysler have obtained more than $13 billion in federal loans, according to reports. They plan to submit a viability plan to the government later this month in hopes of acquiring more assistance, while Ford Motor Co. has said it doesn’t plan to use government aid.

But what effects do the federal bailouts have on local dealers such as Courtesy?

“Zero,” says Rick. “We’re an independent franchise dealer. Dealers are local community people that have their own personal money at risk. We’re entrepreneurs, the factories are huge bureaucratic businesses that received billions of dollars to shore up their balance sheets and use for their own needs.

“That money, not one dime of it will filter into our independent auto dealer’s pocket.”

For Courtesy, that has meant fewer cars in lots — by design — so they don’t “gather dust,” Rick added.

With no bailout and sales on the decline, it isn’t just sellers hurting for cash locally. Lacking sales mean lacking sales tax revenues for municipalities, and Poulsbo is no exception. Motor vehicle sales tax made up 15 percent of the city’s December 2008 earnings; last year during that month it made up 32 percent.

“We’re definitely seeing a decline in motor vehicle sales,” said city Finance Director Debbie Booher. She added the city has also seen an overall sales tax decline of about 17.5 percent. Lessened retail trade and a near halt on construction have made impacts, and one-time revenue sources in 2007, such as State Route 305 and North Kitsap High construction, were missed in 2008.

But, “Is it dire doom and gloom forever? No,” said Booher. The city monitors sales tax revenues on a monthly basis, and the city council has made efforts to diversify its revenue sources.

“Are we seeing a decline? Yes,” Booher added. “Is it as bad as everyone else? No.”

The city also has Viking Way in its sights: A new revitalization task force is kicking off Feb. 13 to address what once was the city’s largest tax revenue-producing corridor. Councilman Ed Stern said two Poulsbo submittals for stimulus dollars, each for a phase of Viking revitalization work, have been approved by the Kitsap Regional Coordinating Council and next go for approval before the Puget Sound Regional Council.

In the meantime, on Poulsbo’s Auto Row, John effuses that, with gas prices lowered and the election year heyday winding down, good news is on the horizon. By the end of 2009, he says, Viking Way’s economy will start picking up. It may be gradual, but those who’ve been smart in the downturn will make it, he surmises.

His sentiments are echoed by the National Automobile Dealers Association, which forecasted a tough 2009 but said dealers should see an upswing in 2010, meaning until then, the natural optimism imperative to the car industry will likely continue to face a harsh economic reality.

“Is it going to be tough? Yeah, she’s going to be tough,” John said. “It always gets tough before it gets better.”

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