credit crisis

Over the next few days, we will take a closer look at the credit market here in Genesee County. Much has been made in the mainstream national media about the "credit freeze" now faced from businesses across the board. Banks aren't lending to other banks, which, in turn, aren't lending to the clients, be they consumers or producers. Everyone, we're told, is feeling the pinch, and lending is rare, if and when it's happening at all. We hope to find out how true that is here in our own region by chatting with those in the know, the sources and go-betweens of those supposedly hard-to-get loans: the auto dealers, the bankers, real estate agents and restaurateurs.

In today's contribution, we will hear from a pair of auto dealers on the availability—and unavailability—of loans in the county...

Harry Zigrossi owns the Zigrossi auto dealership on East Main Street in Batavia. We spoke with him by phone last week.

"It was a very weak November," he said. "There has been a dramatic slowdown in the percentage of approvals... Banks are very tight. Less people are seeking out vehicles."

Zigrossi attributes the slowdown to two factors: Doubt that a consumer would even be approved for a loan, and, if they are approved, worry that the interest rate will be high, if not excessive.

Yes, there are alternatives to financing through the dealership, Zigrossi admits. There are credit unions, local banks. "We have lending institutions," he said. "There are places to apply, but the likelihood of approvals at desirable rates has diminished."

As an example of the tightening credit lines, Zigrossi cites GMAC Financial Services, the financing arm of the GMC dealers. Zigrossi deals in Pontiac, Buick and GMC autos, and acquires much of the funding for his customers through GMAC.

"Their minimum score for approval is 700," he said. "That's pretty selective in my opinion. A couple months ago, approval was based on credit worthiness. There was no set number in the past. ... GMAC's position is: 'We lost several hundred million (dollars) last year. We have very limited funds.'"

You could call it the trickle down economics of the credit crisis. GMAC has a tough time getting its loans—"their ability to borrow is limited," as Zigrossi puts it—so anyone seeking loans from GMAC will have a tough time, as well. It's simple math: you've got so many people seeking loans via so many lines of credit. If the lines of credit are diminished, as Zigrossi indicates, but the same number of people are seeking loans... there's just not enough to go around.

Ken Barrett cites such logic as a reason why some folks may not even bother applying for a loan. Barrett owns Ken Barrett Chevrolet-Cadillac on West Main Street in Batavia.

"We haven't, at this point, had much difficulty, if any, arranging financing for our customers," said Barrett by phone last week. "What I can't really qualify is if there are a cadre of customers that are self-excluding themselves. In other words, based on what they hear in the news media, they're not even going through the process. But I don't have any empirical evidence to say if that's the case. It's more of a gut feel."

In a recent article that ran in the Daily News on the possibility of an auto industry bailout, Barrett was quoted: "I don't think business conditions in Genesee County reflect what we're hearing in the national media. Of all the business people I've talked to, not one has said their business is really bad."

Barrett said that the people of Western New York are the reason business is doing well, as he sees it. We've got smart, responsible consumers.

"In Genesee County, people pay their bills," he said. "Maybe because of the way we're brought up, we dont live excessively beyond our means as other parts of the country may be experiencing. As a community, we pay our bills."

But consumers are only one half of the equation in Barret's estimate. He's also quick to talk up his business practices as one good reason why his dealership is not "having much difficulty" in the midst of this recession.

"We've never aggresively targeted sub-prime activities," said Barrett. "Some dealers really developed that business. Now they're seeing a precipitous slide in their business."

However optimistic a note Barrett might ring for the local auto dealers, the situation doesn't look so rosy elsewhere in the country. From a New York Times article, by Clifford Krauss:

In October alone, 20,000 employees of auto dealerships lost their jobs nationwide, more than half of those who were newly unemployed in the retail trade, according to the Labor Department... And now the credit market—the lifeblood of any car dealership—is frozen.

More than merely a question of credit, however, Krauss hones in on the cultural value of the "small town" dealership, and the further consequences hinted at by the loss of jobs and the tightening of credit. Barrett is right to tout best business practices as a key to remaining financially solvent. But it's not all business...

The auto dealers are not just businesses, of course. Most of them are deeply rooted in their communities, and each is a slice of Americana—their big flags flying, their radio advertisements compelling attention and their Little League sponsorships and other charity helping to improve the lives of local people.

What about you? Have you tried to purchase a car recently and been declined? Approved? Has the ostensible credit freeze iced your chances at getting a loan? How would you feel about the loss of a longtime local dealership: Just another business that couldn't make it? Or much more than that?

After all, no one ever sings: "Drove a Hyundai to the levy..."