Ed Riley has been in the car business for 26 years, managing sales at dealerships throughout New Jersey in good times and bad.
These days, when he heads to his job as general sales manager at Willis Honda in Burlington County, his commute takes him past an empty lot where his previous employer, Patterson Chevrolet, thrived for 77 years.
About 11 acres of empty asphalt, a vacant showroom, and three-dozen blue-and-white light poles still mark the Patterson Chevy site at the corner of Route 33 and Whitehorse Hamilton Square Road in Hamilton, a stark monument to the precipitous decline of car sales in New Jersey.
“It’s a shame,” Riley, 50, says of the venerable Chevrolet dealership where he managed sales before it shut down last August. “I hate to see any business close in today’s time.”
The Patterson property has been for sale for months now. It is among dozens of car dealerships abandoned across the state as New Jersey consumers have snapped their wallets shut amid the wider economic uncertainty.
Since January 2007, about one of every ten automobile dealerships in New Jersey has closed. Monthly unit sales of new cars have plunged more than one-third during that period.
The dealerships have left behind barren lots like the Patterson site, 8,000 jobless salespeople, and a gaping hole in the state budget.
It is a common story in this recession, which has seen retail vacancy rates double in less than two years, according to James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers and a close observer of the state economic scene.
But because of the size of the showrooms left vacant and the amount of business income tax and car sales tax lost, the collapse of auto sales is particularly jarring, Hughes says.
“It’s part of this bigger package, but it’s a very visible part,” he says. “We’re seeing more empty showrooms on the landscape. That means fewer sales employees, fewer mechanics, and the like.”
Hamilton Mayor John F. Bencivengo, a friend of the Patterson family, which started the dealership decades ago, sees the pain on a local level.
“It puts a big hole in that part of town,” he says. “It’s an institution in our town.”
When Patterson Chevy closed its doors, some of the sales staff and the mechanics were transferred to a second dealership the company’s owners operate on Route 1 in Lawrence Township. Others were laid off, joining the more than 330,000 residents who were jobless in the state last year.
The same scenario played out when DCH Auto Group of South Amboy got out of the Saturn business and closed its dealerships in Eatontown and North Brunswick in February. Of the 70 employees at the two locations, only about one-fifth found new positions elsewhere in DCH, according to Roy Bavaro, director of corporate marketing for DCH.
For years, car dealers could count on selling more than 600,000 new vehicles per year in the Garden State, an average of better than 2,000 cars every business day. The state, too, grew to count on the business, with sales taxes and motor vehicle fees generating hundreds of millions of dollars.
But late last year, the market stalled.
In October, for only the second time since 2000, according to the Department of Motor Vehicles, monthly car sales totaled fewer than 40,000. In November and December, sales did not crack 30,000; total sales for the two months slid by 31 percent compared to a year earlier.
“The fourth quarter of 2008 was like nuclear winter,” says James Appleton, head of the New Jersey Coalition of Automotive Retailers. “The brakes were slammed on, and sales dropped precipitously.”
The sales plunge deepened this year. January’s new car sales were 36 percent below a year earlier, according to statistics compiled by the state Motor Vehicle Commission. The weakness even spread to the used-car market, where January sales were off by 10 percent.
“I don’t sleep as good as I used to,” says Riley. “It’s tough times, but I think this is when you’ll see the good people shine.”
In Trenton, the collapse in car sales was mirrored in the tax ledgers, contributing to a budget calamity. Appleton estimates each 1 percent drop in car sales costs the state $10 million in lost sales taxes and fees.
By that measure, the one-third drop in car sales playing out in 2009 would cut state revenues by more than $330 million—about half the total decline in sales tax revenues expected by the end of the fiscal year in June.
Since October, sales tax revenue for the state has fallen $653 million behind budgeted projections, according to reports from the state Treasury Department and the nonpartisan Office of Legislative Services. To help make up that shortfall, the state’s wealthiest taxpayers, the 44,000 residents who are expected to earn $500,000 or more this year, face the prospect of a $380 million income tax hike.
The surge in joblessness, meanwhile, prompted such a draw on the state’s Unemployment Insurance Trust Fund that it ran dry in March. To shore up the fund, state officials have announced a $370 million business tax increase on top of about $400 million in supplemental state payments.
Fewer car sales and fewer jobs also mean less driving, which has choked the toll and gas-tax revenues the state counts on to finance highway repairs and mass transit.
Last year, with declining toll revenues threatening to trigger a default on outstanding New Jersey Turnpike bonds, tolls were raised by 40 percent.
Motorists also face declining state services as revenue dries up from the registration fees and other transactions that pay for operations of the state Motor Vehicle Commission.
The Commission plans a $20 million hike in non-registration fees later this year, but Governor Jon Corzine hopes to channel the proceeds from that increase into the state’s general budget.
“It’s a painful transition, moving back to a much more conservative consumer environment,” says Hughes.
New Jersey has been through a collapse in the auto industry once before. Until the 1970s, auto making was a jewel in the state’s manufacturing crown, employing more than 17,000 workers in factories from Mahwah to Ewing. But in 2005, the last made-in-New Jersey car, a Chevy Blazer, rolled off the General Motors assembly line in Linden.
The wrenching collapse was chronicled on the front pages of newspapers and in popular culture. Bruce Springsteen weighed in with his 1992 ballad, “Johnny 99,” which was set against the closing of the sprawling Ford plant in Mahwah.
Just as the demise of those massive car plants was a symbol of the loss of blue-collar manufacturing jobs in the state, the disappearing dealerships are emblematic of today’s economic downturn.
But while the manufacturing plants are likely gone for good, at least some of the state’s remaining dealers can look forward to better days.
“You are going to find there will be fewer dealers once the dust settles,” says Bavaro, of DCH. “There will be some that will survive, and some that won’t survive.”
New Jerseyans one day will have money to spend again, says Hughes. And today’s cars one day will need to be replaced.
“Cars are like caskets,” Appleton says, quoting a line he heard from an optimistic car salesman. “Everybody needs one eventually.”
Contributor Dunstan McNichol was a longtime staff reporter for the Star-Ledger and other newspapers. He lives in Ewing.