By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Leading Bahamian auto dealers yesterday warned they are close to cutting employment to “skeleton” levels, as new car sales fell 8 per cent year-over-year during the 2016 first half.

Fred Albury, the Bahamas Motor Dealers Association’s president, told Tribune Business that he was assessing two options - either selling or downsizing his Auto Mall business.

He disclosed that his Freeport business had lost “one-third of its value” in the past three years, with annual losses of $200,000 pushing him towards “closing the doors” there unless ‘break even’ can be reached soon.

Ben Albury, Bahamas Bus and Truck’s general manager, echoed his namesake’s fears, disclosing to Tribune Business that his company was also near the point of significant downsizing.

He revealed that Bahamas Bus and Truck would soon “have to borrow money to make payroll” unless there was major restructuring, which could involve reducing the company to “skeleton operations compared to where we are now”.

The two dealers’ comments reflect the declining strength of an industry that has seen annual new car sales fall by two-thirds, or 66.8 per cent, compared to a pre-recession peak of 4,200 in 2007.

Bahamian auto dealers have largely avoided any workforce redundancies over the past eight years, clinging on to hopes that the economic environment would eventually rebound following the 2008-2009 ‘credit crunch’ and subsequent global recession.

However, the Bahamas’ tepid economic recovery, coupled with the introduction of Value-Added Tax (VAT) and inability of many car buyers to access credit, means the hoped-for rebound has yet to materialise.

As a result, auto dealers are rapidly approaching the point where they have no choice but to cut back if their businesses are to reduce/eliminate losses and survive.

“For the first time in my life, I’m thinking if I can sell and get the hell out and retire, or shrinking the business model size to fit the economic times. To do that means I’ve got to cut back on staffing,” Fred Albury said of the Auto Mall, the umbrella business for Executive Motors and Quality Auto.

He told Tribune Business he was especially concerned about his Freeport business, as that city - and Grand Bahama as a whole - have suffered longer, and greater, than Nassau.

“Let’s not go to Freeport,” Fred Albury said. “That’s in such a depressed state. It’s not a recession; it’s been in a depression.

“In the last three years, I’ve lost a third of the value of the company there just to losses. My people are looking to see what to do to get it to a ‘break even’ point, and if that does not happen we might have to close the doors.

“It’s not a pretty picture,” Fred Albury added. “We’ve been in Freeport since 1987, but have been losing $200,000 a year, and closing means you save $200,000 a year in losses.

“But we have staff we have commitments to, and are going to hang in there as long as we can. If we have to close up, that’s 18 people out of jobs.”

Bahamas Bus and Truck’s Ben Albury was equally forthright about the perilous conditions facing both his company and the wider Bahamian auto industry.

Asked by Tribune Business about the current state of the auto market, he responded: “What market? Right now, there really is none. It’s pretty brutal right now.”

Ben Albury disclosed that 4,200 new vehicles were sold in 2007, the last pre-recession year, compared to the 1,564 that BMDA members moved in 2015 - a decline of 66.8 per cent or two-thirds in nine years.

The BMDA, in a statement issued yesterday, said new auto sales had fallen by a further 8 per cent during the first six months of 2016, following a 38 per cent year-over-year decline in 2015.

“In the face of declining sales and mounting taxes and regulations, the signs are somewhat foreboding for the new vehicle industry,” the BMDA statement concluded.

That may be something of an understatement based on the comments from both Alburys, with Ben Albury telling Tribune Business: “This year, if it continues to go the way it has been going, we might expect to get somewhere around 1,200 [new car sales].”

Turning to the wider auto industry, the Bahamas Bus and Truck general manager added: “We’re doing all we can to retain staff. We hear that a lot of companies are keeping a great deal of their staff on, although the majority of them are losing money.”

Warning that it was “only a matter of time” before the industry has to turn to redundancies, Ben Albury said his own company was rapidly approaching a turning point of its own.

“I’m probably going to have to be looking at reducing staff levels and doing some redundancies, as there’s no way we can keep the staff levels we do, and keep investing, without a major improvement in business,” he told Tribune Business.

“I’m waiting on some financial reports now, and based upon that, I will advise the owners we may have to do it. If the business continues to operate as presently, it will not be long before we will be like the Government and have to borrow money to continue to operate.

“I can’t see the principals of this company borrowing money to make payroll,” Ben Albury continued. “We have to look at some downsizing and restructuring to where we have skeleton operations compared to where we are now, and cut back in the areas hardest hit.”

Fred Albury told Tribune Business that the auto industry’s health, in common with many other sectors, depended heavily on a rebound in Bahamian GDP growth.

“We need to get this economy on the upswing,” the BMDA president said. “It’s been contracting, contracting and contracting. It needs to be turned and put on the upswing.

“It’s not a pretty picture in the new car industry. I don’t know what to say, but the next couple of years are not looking bright.”

Turning to the politicians, Fred Albury added: “The can paint all the pretty pictures they want, pump out all the hot air they want, but the picture does not look pretty from where I sit in business.”

Detailing the obstacles its members were currently facing, the BMDA said in a statement: “Beside the high import taxes of 65 per cent, the next largest hurdle facing buyers is the Value Added Tax (VAT) of 7.5 per cent.

“It seems to follow that the reduced number of new vehicle imports is impacting government revenue. This is decline not evident in the Government’s recent budget or Central Bank Quarterly Report, as the details are not available to the public.”