Motorcycle dealers grit teeth through bumpy downturn

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http://www.mercurynews.com/news/ci_15138237?source=rss&nclick_check=1 Motorcycle dealers grit teeth through bumpy downturn By Susan Carpenter
Los Angeles Times
Posted: 05/21/2010 07:06:51 PM PDT Updated: 05/23/2010 09:41:54 AM PDT
LOS ANGELES — Motorcycles are fun to ride, but that's not enough to carry sales of them through tough times, even though key economic indicators signal that the recession may be over.
In fact, motorcycle retailers were doing better in the midst of the recession.
Sales of bikes were down 4.6 percent in the first quarter of 2010 compared with the same period a year earlier, according to the Irvine-based Motorcycle Industry Council trade association.
Street bikes, as opposed to off-road motorcycles, took a big hit, suffering a 7 percent drop, while scooters did even worse — down 13.3 percent. That's troubling for an industry that was hoping business would improve in 2010 after a disastrous 2009 that saw sales tumble 43.2 percent for the year.
Survival strategy
Hard hit by a down economy that has tightened credit and by stable gasoline prices that no longer have people considering motorcycles and scooters because of their fuel economy, motorcycle dealers are scrambling to find customers any way they can.
"This year is going to be rough," said Dennis Johnson, editor in chief at Dealer News, a trade magazine in Irvine that covers the power sports industry. With so few buyers in the market for new bikes, Johnson said dealers are focusing on parts, accessories and pre-owned motorcycles as a survival strategy.
"Coming off a year of sales declines, the industry knew it had to get aggressive," said Cam Arnold, vice president of communications for the Motorcycle Industry Council, which represents motorcycle, scooter and ATV manufacturers and parts suppliers. "We had to do something to get customers back into dealerships."
Last month, the "something" was a Revive Your Ride sweepstakes with discounts, a sweepstakes and other dealer promotions. But it's not likely to be a magic bullet.
"Things really don't look that encouraging," said Oliver Shokouh, owner of Harley-Davidson of Glendale. "We're definitely cutting back on inventory, realizing this year nothing is going to set the world on fire."
What's selling for Shokouh right now?
"Not a whole lot," he said, even though the top sales season for motorcycles is generally April through June. Shokouh says the lowest-priced Harleys, such as the Sportster and Dyna models, are selling best.
Like a lot of dealerships, Harley-Davidson of Glendale has pared its hours and trimmed its staff in the past year.
One of the largest dealers in the Los Angeles area, the 230,000-square-foot Bert's Megamall in Covina cut a third of its work force and reduced its operating hours in 2009.
Last year was "the most difficult year of my life," said Ron Seidner, who has owned Bert's for 35 years. "I don't see the industry ever getting back to where it was. I don't want to be negative, but I don't foresee the banks ever being as stupid as they were."
The motorcycle industry's top sales year of all time paralleled the housing market's. It was 2006, when 1.9 million motorcycles and scooters were sold, and many buyers used money from home equity lines of credit to make expensive purchases. Credit was flowing freely to motorcycle buyers, a third of whom use borrowed money for the purchase. Last year, the number of motorcycles and scooters sold was down to 627,000, with the emphasis on less expensive bikes.
Secondhand trend
"We're seeing a lot of people looking for secondhand vehicles," Seidner said. "There's an increase in guys who don't want to spend $12,000 but $4,000."
"Last year, everything just kind of died," said Michael Frankovich, owner of NoHo Scooters in North Hollywood.
Frankovich, like a lot of dealers, was taken by surprise when the economy took a dramatic downturn early in 2009. Sales in 2008 had been the biggest ever for scooters. Thinking that trend would continue, Frankovich ordered too much inventory last year.
Now he is focusing on used, low-mileage scooters he's finding at auction, on Craigslist, even at other dealers.
"We used to sell one pre-owned for every nine or 10 we sold new. Now it's three or four used to every 10 new," Frankovich said.