Detroit-area dealers struggle with submerged autos, trapped customers

Pat Presutti, new-car sales manager at Jim Riehl's Friendly Chrysler Jeep in Warren, Mich., surveys vehicle damage on Wednesday, following the region's torrential rains on Monday.

Photo credit: Larry Peplin
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DETROIT -- As the rain fell the afternoon of Aug. 11, Pat Presutti, new-car sales manager at Jim Riehl’s Friendly Chrysler Jeep in Warren, Mich., sent a porter out to check the water level in the back lot where nearly 100 cars were parked.

It was only about a half inch deep.

But after “all hell broke loose,” during the early evening commute, it only took 15 minutes for the pooling rainwater to reach the rocker panel below the vehicle doors.

“Once it gets over that, your carpet is soaked and it goes into the bottom of the motor,” Presutti said.

By 8 p.m., dumpsters were floating around in the car lot.

Some 4-5 inches of rain inundated the Detroit area in just a few hours -- stranding motorists, closing highways, and creating nightmares for auto dealers as well as the Detroit 3 automakers. 

Not far from Riehl in Warren, the General Motors Tech Center was still pumping water out of basements on Friday. 

Not a prank

And that evening at Riehl, as the water reached the carpet below the vehicle seats where electronic control modules are housed, trunks began to open, windows began to go up and down and airbags deployed, as if a mean spirit were playing pranks.

But it was no prank. Nothing could be done to save the new vehicles. 

“By the time you pull 80 keys and try to move 80 cars, you’re not going to make it,” Presutti said.

On Tuesday morning, mud lines on windshields told the story of the flood’s rise and fall, as did vehicle interiors with mud-encrusted steering wheels and dashboards.

“I’ve never been in a flood situation,” Presutti said. “We’ve had theft and damage, but never a flood situation.”

As a general policy, dealerships carry insurance on their inventory, and so does Jim Riehl’s Friendly Chrysler Jeep, he said.

Of 85 new vehicles submerged in the dealership’s parking lot, Presutti expects 83 will be a total loss resulting in an insurance claim of about $2.5 million.

But the dealership will only break even with the claim, he said. When the flood waters receded, they took with them any chance of making a profit on the vehicles and dampened sales for the near term.

“What you’re going to sell the most of for August and September is 2014 (models); customers want the deal,” he said.

The majority of the new vehicles lost on the lot were 2014 models.

Seeking higher ground

A couple of miles south, Galeana’s Van Dyke Dodge also watched as the water rose to about 3 feet on the heavily traveled Van Dyke Avenue, bringing it about halfway up the dealership lot.

Fortunately, Galeana’s is on higher ground, and employees were able to move cars from the front end of the dealership farther back so they were not affected, sales manager John Caldwell said.

But he cringed, he said, every time a truck pushed through the flood waters on VanDyke, creating a tidal wave that pushed farther into the lot.

The dealership stayed open until 1 a.m. when the last trapped customer left. And Caldwell said he let many of the salespeople who’d stayed drive a new truck home so they could navigate their way with higher clearance from the ground.

As of late last week, 35 vehicles had been towed or brought in to be assessed for water damage. Caldwell believes that number will at least double, given that local impound yards are still crowded with cars salvaged as the water receded.

“Once the water hits the computers, electrical systems and interior, I don’t think the insurance company is looking at them,” he said. “I believe that most of these cars are going to end up being totaled.”

Expensive repairs

A repair estimated to cost $2,000 can morph into a $10,000 or $15,000 repair very quickly once the car has been taken apart, Caldwell said.

Rather than run the risk of losing the majority of a vehicle’s value, insurance companies can sell a $20,000 car, for example, for half that amount at an auction as a salvage vehicle “and they know exactly what they’re dealing with in terms of a loss,” he said.

About 4.5 inches of rain fell in metro Detroit on Monday, and highways throughout the region remain flooded for 2-3 days. It took until Friday for all the roads to reopen.

Photo credit: TOM WOROBEC

AAA Michigan has received “over 1,000 vehicle claims,” said Public Affairs Director Susan Hiltz. “We expect to total 60-70 percent of them, and repair the rest, she said.

Some people believe dealers will sell a lot of cars because of the number being declared a total loss, Caldwell said. “And from the ones that are totaled out, we will have instant sales.”

But the forced new-car sales likely will be a wash on the bottom line, since people whose homes were flooded are likely to defer their planned purchases of new vehicles, he said.

Caldwell said he doesn’t plan to order additional inventory in anticipation of a flood-induced sales surge because he think sales will just remain steady.

“I don’t think this will hurt us, but I don’t think there’s going to be a huge lift,” he said.

When a dealership’s inventory is depleted by acts of nature, you have vehicles you can’t move until insurance companies come in and repair or total the vehicles, said Scott LaRiche, co-owner of Lou LaRiche Chevrolet in Plymouth Township, Mich., west of Detroit.

Though the Plymouth Township dealership was unaffected by flood water, its Findlay, Ohio, dealership suffered significant losses in the past from hail damage.

“You’re scrambling trying to do dealer trades and buy products from other dealers,” he said.

“Most dealers are extremely generous with other dealers who get hit. We do compete, but what goes around comes around. ... We know some day it may happen to us.”

A pizza surprise

Another dealer in Warren, Elite Motor Sales & Service, also watched as the water surged halfway up its parking lot. Fortunately, none of its 60 used vehicles -- mostly trucks and SUVs -- were affected, said manager Mark Maniaci.

The majority of the new vehicles lost on Riehl's lot were 2014 models.

Photo credit: Larry Peplin

He was able to put one of the trucks on the lot to good use, helping to rescue a pregnant woman and her two young children, all of whom climbed from their submerged vehicle nearby on Groesbeck Highway and through the truck’s windows.

Stranded customers and others who sought refuge on the dealership’s higher ground made the best of it, including a pizza delivery guy who shared with everyone the pizza that never made it to its scheduled destination.

Maniaci expects Elite’s repair business for vehicles affected by the flood to surge for the next week of so, then taper off. He’s projecting it may rise as much as 10-15 percent for the month or 2-4 percent year-over-year for the dealership which does $2 million to $2.5 million in annual sales.

Said Maniaci: "I’m fortunate to have a place here that didn’t get affected, and generated business because of it."

You can reach Sherri Welch at swelch@crain.com.


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