In survival mode

Bruce McConnell has laid off 10 people at his car dealerships in Healdsburg and Cloverdale this year, a 15 percent reduction forced by a gut-wrenching 30 percent drop in sales last year.

At Freeman Toyota in Santa Rosa, sales manager Rich Williams studies a wall-sized chart in his office showing March sales veering sharply away from trucks and SUVs toward lighter, fuel-efficient gas and hybrid sedans.

And just down Corby Avenue at Hansel Ford, customers worried about gas prices going even higher are increasingly opting to lease instead of buy new vehicles.

Car dealers in Sonoma County are struggling through the worst slump in car sales in years, as soaring gas prices, the limping real estate market and looming recession are spooking consumers and forcing dealers to shift sales strategies to survive.

"The word ain't good out there," said Denny Fitzpatrick, president of the California Motor Car Dealers Association and a Chevrolet dealer in Concord. "People are holding onto their money right now."

Fitzpatrick's group recently reported an 8.2 percent drop in new vehicle registrations statewide in 2007, twice the drop they originally predicted.

The 1.8 million vehicles registered in the state was the lowest number since 1999, the group reported.

Domestic manufacturers suffered the sharpest declines, off 16 percent last year compared to more modest declines in their Japanese and European counterparts.

Large SUVs and pickups lost market share to compact SUVs and passenger cars, according to the group's publication California Auto Outlook.

Sonoma County new vehicle sales dropped even more sharply, falling 12 percent, from 21,327 in 2006 to 18,841 last year, according to AutoCount, an Orlando-based firm that tracks auto sales.

Fierce competition

The drop-off in sales has created the most fiercely competitive auto sales environment in the county in years.

"This business used to be like a Venus flytrap -- you just waited for people to come in," said John Tomich, general sales manager for Hansel Ford Lincoln-Mercury. "Not anymore."

Dealers are cutting costs, offering aggressive prices and financing, and making customers feel like royalty.

"Now, when customers come in, we're giving them the red carpet treatment," says Michael Courier, general sales manager at Manly Honda in Santa Rosa, whose sales were down slightly in 2007.

As gas prices continue their record run toward $4, dealers are putting their best foot forward by highlighting their most fuel-efficient models and aggressively pricing those that don't have the greenest credentials.

Increasingly, that means customers are interested in hybrid vehicles, figuring the high gas prices now make the extra cost of hybrids worth the investment.

So far in March, of the 58 new passenger vehicles sold at Freeman Toyota, 37 were hybrids, 30 Prius and 7 Camry hybrids, Williams said. That's a whopping 64 percent of the dealership's new passenger car sales.

Focus on fuel efficiency

While overall sales are down slightly from last year, the strength of hybrid sales and sales of nonhybrid passenger vehicles getting more than 30 miles per gallon are making up for lagging pickup and SUV sales, Williams said.

Dealers are emphasizing the fuel efficiency of their vehicles like never before. Hansel Auto Group, the largest car dealer in the county, has advertisements highlighting not only the mpg of different models, but how far each can go on a full tank of gas.

The 2008 Volkswagen Jetta, for example, gets 29 mpg on the highway and can get you to Oregon without refueling. A full-sized Cadillac DTC, while laboring to go a mere 15 mpg in the city, can still manage to get to Tahoe and back on a single tank of gas, Hansel notes.

The dealership also is stressing not just how far cars will go, but how gently they tread on Mother Earth while getting you there.

"A lot of people not only care about fuel efficiency, they are concerned about the environment, especially around here," Tomich said.

The 2008 Ford Focus, for example, is selling well in part because it's a partial zero-emissions vehicle, meaning it has zero evaporative emissions from its tailpipe, Tomich said.

Consumers downsizing

Many consumers are motivated to downsize their vehicles by a combination of costs and conscientiousness.

Diane Gifford bought a 2007 GMC pickup for $29,000 last month in part because she wanted enough power to tow a horse trailer.

The 43-year-old Santa Rosa resident, a nurse at medical device maker Medtronic, has a horse named MC that she keeps in Penngrove, and she wanted the freedom to haul him somewhere whenever she wanted.

But after 5 weeks of getting 15 mpg, Gifford couldn't stomach it anymore.

"Even just filling up half or three-quarters of a tank was pretty painful," she said.

The wastefulness of commuting in such a big vehicle also took its toll on more than just her pocketbook.

"It's a great truck, but it was really a lot more vehicle than what I needed," Gifford said. "And part of me felt like I was single-handedly killing the planet."

So last week, she traded the $29,000 truck in for a 2009 Toyota Corolla that cost $10,000 less and gets about 34 mpg. She "took a hit" on the trade-in, but overall is pleased with her decision.

"It's a great little car," she said.

For domestic dealers like McConnell, whose dealerships carry high inventories of big pickups and SUVs, times are tough.

He estimates total sales at the two dealerships are down 75 percent since 2004. "It's a real, real nasty situation right now," he said.

He has cut 10 people this year, gotten salary concessions from others, and his wife, Liz, has begun working at the Healdsburg dealership to reduce costs. Together they work 110 hours a week. Mundane tasks such as changing light bulbs and spraying weeds now fall to him as staff has been reduced.

One thing that has helped is interest rate cuts. Most dealers finance their fleets, making interest one of their highest expenses. A year ago, the prime rate was 8.25 percent, but today it's 5 percent, which translates into a $15,000 savings per month for McConnell.

While rates are lower, the credit market remains tight, leaving fewer people able to get financing for new vehicles. So McConnell is focusing on used car sales.

"This is a market of what people need, not what they want," McConnell said. "People want that new car, but what they need is something small and cheap."

Many dealers in other parts of the state are going under, and repossessions are up. That's causing used car prices to plummet at auction, making better vehicles affordable to more people, he said.

It is difficult to go to auctions looking to profit off the suffering of dealers who couldn't make it, but McConnell said he has no choice.

"It's bittersweet, but it's survival mode," he said.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@

pressdemocrat.com.