cbloomsburg@journalnet.com

POCATELLO - Local auto dealers say they are keeping a close eye on their inventory and the terms of their financing agreements in order to avoid going the way of B.A. Wackerli Company, Inc.

Wackerli, based in Idaho Falls, filed for Chapter 11 bankruptcy on Feb. 20, after being in business for more than half a century.

"It's absolutely a sign of the times," said John McCormick, the chairman of the Pocatello New Auto Dealers' Association on Wednesday in response to Wackerli's petition.

McCormick said dealers are finding themselves caught between two issues - lenders having no tolerance for dealers keeping any extra inventory and customers too spooked by the shaky economy to make any long-term financial commitments.

With new car sales slowing, Park Price, the president of the Bank of Idaho and former owner of Park Price Auto in Pocatello, stressed the importance of inventory management to dealers.

"Sometimes when business contracts, you just can't shrink fast enough, and that must be what happened to Steve (owner of B.A. Wackerli Company, Inc.)," Price said.

McCormick agreed that his industry is a very capital intensive industry, meaning dealers need to have liquid assets on hand just to operate, and if a dealer were to get too much cash tied up in inventory it could be the end of their business.

"These banks have very little temperature right now for people who aren't operating efficiently," McCormick said. "They (banks) are calling notes if they feel that their credit line is at risk."

McCormick said an example of something a bank would perceive as inefficient inventory management would be a dealer who had a large amount of new 2008 inventory, or worse yet, unsold 2007 models on hand.

Although the lenders are focusing on auto credit lines right now, McCormick said any business that relies on a sizable inventory may be hearing from their bank soon.

"These flooring sources (banks that furnish lines of credit to dealers for purchasing cars) are going to want to protect their position, whether it's boats, RVs, or trailers. I have no doubt it couldn't spill out into commercial industry at large," McCormick said.

However, skittish customers haven't run away from car lots altogether, McCormick said. Instead, people are turning to the less-costly used car market.

McCormick has noticed an increase in people looking for clean, low-mileage used vehicles to provide dependable transportation while still remaining within the confines of their shrinking budgets.

"The dealers in my association are doing OK. The consumer right now is very nervous about making a commitment, but all of the franchise new car dealers have healthy and strong used vehicle operations that will carry them through," McCormick said.