By Claudia Hirsch

NEW YORK, Nov 27 (MNI) - November new vehicle sales volume ran even or slightly better than October and a year ago, further evidence the battered industry is stabilizing if not roaring back, according to U.S. auto dealers.

Inventory is ratcheting higher but still remains light following the summer sales bonanza of Cash for Clunkers and earlier production cuts, dealers said. Lack of supply continues to limit the rebound, but so too is lingering consumer caution. Some dealers believe the struggling industry has finally turned a corner, but even the most optimistic say the path ahead will be bumpy.

"You can't get aggressive when you don't have the product," said Ralph Martinez, chief executive of Town and Country Dealerships, headquartered in Milwaukie, Ore., whose five Portland-area dealerships sell Chrysler, Jeep, Dodge, Chevrolet, Mitsubishi and Hyundai brands. "Our inventory is all out of balance."

His new vehicle sales levels haven't recovered much from the post-Clunkers sales and inventory plunge in September. But November and year-to-date volume should equal 2008 figures, he said.

"We're selling maybe one or two more cars than in September - nothing substantial," Martinez said. His Chrysler stores are each averaging 18-25 new vehicle sales a month right now, compared with 45-50 units in "mediocre" months before the recession and as many as 90 in good months. His Chevy store now moves 20-30 new vehicles a month, compared with as many as 100 or as little as 50 before the industry hit the skids. Used sales and service are driving his business right now.

"We're getting used to horrible," he said. "I'm waiting for bad to come back. I can make a lot of money in bad."

Martinez said high unemployment in his area is contributing to soft new vehicle sales.

Notably, Martinez said the bankruptcy stigma hit his Chevy sales and service more than it did his Chrysler showrooms. His Chrysler products also seem to be benefitting more from area dealership closures.

A General Motors dealer in Texas said November sales volume topped October's and that of a year ago, despite deficient supply. Unlike Martinez, he's seen a shift in consumers' attitudes.

"I think there's a little more comfort in the future," said Wyman Williams, soon-to-be-former owner of Williams Motors, in Commerce, about 60 miles from Dallas. "People aren't quite as focused on gloom and doom. And their vehicles are just wearing out."

Williams is awaiting approval from GM and its lending arm for sale of his dealership to a prospective buyer that started operating the store in October. Williams knew when he filed for chapter 11 bankruptcy protection in April that he would have to take on a partner or find an outside buyer to emerge from the reorganization successfully. He decided he wanted out.

"It was obvious that the business was going to get a lot tougher," said Williams, who's worked in the industry 49 years and has run his dealership since 1979. "And I was in a very weak capital position."

He said the prospective buyer is doing well so far and is energetically capitalizing on the closing of five area GM dealerships. Williams will stay on as a consultant for another three years.

A Ford dealer in Chicago said he's feeling much better about business today than he was a year ago.

"The worst is behind us," said John LeFevour, general manager of McCarthy Ford, on the south side of the Windy City. "I'm now used to below-average sales. But I'm not feeling that I'm going to lose my business. We've done what we've had to do to stay in the black."

LeFevour said he sold a few more new vehicles in October and November than he did a year ago, and November volume matched that of October, which is about par seasonally. But he described a whiplash in sales volume sparked by the August windfall from the federal rebate for guzzler trade-ins.

"We sold the most cars we've ever sold in August, but we had the worst unit month ever in September, primarily because we didn't have much inventory for the first two weeks of the month," he said. "We didn't have one Focus, Fusion or Escape - any of our prime vehicles."

Supply started trickling back in later in the month and has climbed since then. LeFevour said the clunkers program probably did not pull forward many sales after September.

He said the driving public is beginning to unleash some of the long pent-up demand for new vehicles, and Ford appears to be benefitting more than its two Detroit rivals.

"The fact that Ford didn't take the (federal) bailout money is a huge thing. I hear that from people all the time," LeFevour said, and added that the real selling point is its acclaimed product line-up, including Fusion, Motor Trend magazine's 2009 car of the year.

Despite a dismal first four months of the year, he said his total new-vehicle sales volume this year should be about even with 2008. Even though the toughest times may be over, the landscape has probably changed forever, he said. The highs won't be as high, but surviving dealers are running leaner, so even a slight uptick will make a big difference, LeFevour said.

A Chevy dealer in northern New Jersey said Cash for Clunkers did indeed cannibalize his fall sales, and the program's unfortunate timing tripped up GM dealers especially, given the automaker's bankruptcy distraction and extremely low production levels.

"I don't want to rob Peter to pay Paul," said Jim Russomano, owner of Nutley Chevrolet, in Nutley. "It's a very difficult way to run a business."

His new-vehicle sales volume has remained at post-clunkers-depressed levels since September. Russomano said he's not satisfied just beating year-ago figures. Local consumers aren't yet in recovery, he said, and some have been turned off to GM by how it handled its financial difficulties, including taking federal loans.

"Some long-time customers who are angry about General Motors' bankruptcy say they'll never buy another GM vehicle again, and that's really hard to swallow."

He expects his volume to revive later in 2010. For now, his service bays are busy with relatively large repairs, which he said is a reflection of drivers' intent to hold onto their cars for some time.

"We're seeing more people buy their leases," Russomano said. Others are having difficulty coming up with the residual payment or finding enough for a downpayment on a new vehicle because of still-tight lending requirements, he said.

Russomano is about to add a franchise of Korean economy brand Kia in his store.

A Toyota dealer in St. Louis agreed that the summertime rebate, though a welcome boon to business at the time, has made for quiet autumn.

"It's been dead ever since clunkers," said Brian Hacay, general manager of Ackerman Toyota Scion.

But he said November brought an uptick from October and likely a small gain over last year, mostly due to the lure of the fast-expiring tax deduction for state, local and excise taxes on new vehicles that had been included in the federal stimulus package earlier this year. Hacay said a recent direct ad mailing he sent on the tax break was successful.

Even so, showroom traffic is bruised, still off 30% or 40% from normal times. Consumer caution remains "fierce," Hacay said, and he noted the July closing of a local Chrysler plant and layoffs this year and last at beer brewing giant Anheuser-Busch.

He has enough inventory again, but it's leaner by design. Reducing financing totals on his inventory has been one key to keeping his business profitable and preventing layoffs. Hacay said the auto industry isn't out of the woods yet.

"I think we're still in for a lot of pain ahead."

J.D. Power and Associates last week estimated that November U.S. new vehicle retail sales should ease just 0.4% year over year, illustrating what the market research firm described as "an industry on the mend." Retail sales may plunge nearly 18% vs. October, however, based on data collected for the first 11 selling days of the month. Fleet sales are expected to pop 3.5% higher from a year ago. Trucks should again increase their market share on the month, to 51% of the retail market in November, the research firm said.

Automakers are scheduled to release November domestic sales data on Tuesday, Dec. 1.

Editor's Note: Reality Check stories survey sentiment among business people and their trade associations. They are intended to complement and anticipate economic data and to provide a view into specific sectors of the U.S. economy.

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