Business Owners Sound Off On Economy

Three business owners talk about the effects of the credit crisis on their enterprises. The owner of a car dealership, a startup creator and the owner of a pet store discuss their businesses.

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MELISSA BLOCK, host:

From NPR News, this is All Things Considered. I'm Melissa Block. As the debate over the financial bailout has dominated Congress and the presidential race, the rallying cry has been Main Street - as in, we need to be looking out for Main Street, not Wall Street. And there have been scary predictions from political leaders from the president on down about what could happen on Main Street if the bailout doesn't ultimately go through and fast. So we're going to check in now with some business owners about what Wall Street's troubles have meant to them.

First, car sales. The Village Automotive Group is a collection of seven dealerships in the greater Boston area. It sells Cadillacs, Saabs, Volvos, Hondas and Hyundais. Owner Ray Ciccolo says in 50 years in business, he's never seen anything like what's going on now.

Mr. RAY CICCOLO (Owner, Village Automotive Group): Customers that would normally have no problem whatsoever to get credit to buy an automobile are being turned down by the banks. This is the first time ever. We're not talking about people with marginal credit. We're talking about people with very, very good credit. The banks said don't have enough cash to want to loan to these customers.

BLOCK: So you're saying that the banks' credit among themselves is drying up, and that's affecting you as well.

Mr. CICCOLO: Yes, and I found for the first time ever, a customer came in with good credit and wanted to buy a car, and the bank suggested and had me sign a note that said in the event of a repossession, the first $2,700 of loss, that I would pay the first $2,700. Again, that's the first time in all the years I've been in business I've been asked to do something like that.

BLOCK: How is all this translating into numbers of car sales for you?

Mr. CICCOLO: Well, our sales are down almost 25 percent.

BLOCK: Down, this year over last year?

Mr. CICCOLO: Yes.

BLOCK: 25 percent.

Mr. CICCOLO: Yes.

BLOCK: Are you keeping a whole lot fewer cars on the lot now?

Mr. CICCOLO: The answer is yes. We will stock fewer cars, which means that we will order fewer from the manufacturer and subsequently, he will begin slowing down his production, and that's felt and manifests itself in the loss of jobs.

BLOCK: I'm curious, too, if you're seeing customers coming in buying not as fancy a car as they might have a year or two ago. Maybe they're getting a Hyundai where before, they might have gotten a Volvo or a Saab.

Mr. CICOLO: That's happening. They're a lot more conscious of gas mileage. But, you know, I think it's really a question of what can I afford, and what will the banks finance for me. And customers are still looking for as cheap a monthly payment as they possibly can get. The used car business is brisk, and the cars that get good gas mileage, the new ones, are definitely selling. In some cases, there's a little bit a shortage of supply, but they are selling.

BLOCK: Well, Mr. Ciccolo, thanks a lot for talking with us.

Mr. CICCOLO: Oh, my pleasure.

BLOCK: That's Ray Ciccolo, owner of the Village Automotive Groups, speaking with us from Boston. Next, a contractor in Metairie, Louisiana. Factory Service Agency Incorporated installs commercial air conditioning. Mike Mitternight is the owner, and he says buying big pieces of equipment is no longer easy.

Mr. MIKE MITTERNIGHT (Owner, Factory Service Agency Inc.): In days gone by, before there was such tight credit, most of the major manufacturers and suppliers would work with us and allow us a 45- to 60-day turnaround time to make those payments. And now, most of the major suppliers are looking for terms of net 30 and...

BLOCK: They want to be repaid in 30 days.

Mr. MITTERNIGHT: They want to be paid in 30 days, and what that does to me, in many instances, in order to maintain credit with those companies is quite often, I will have to either tap into my line of credit or go make a loan from some sort of a banking institution. And the interest on that loan has, in most cases, not been figured into my bid when I bid these jobs.

BLOCK: I wonder how different a case New Orleans is because of the special circumstances of Katrina and so much business that must be generated by the rebuilding effort. If you talk to your colleagues in other parts of the country, are they seeing a very different situation than you are?

Mr. MITTERNIGHT: I think they are worse than we are. We are somewhat isolated from the national economic trends - although we're starting to see some of the credit tightening here, too. We felt like we were somewhat insulated because of the Katrina rebuild boom. But a lot of the rebuilding effort that was intended, and some of the new structures and new condo buildings - Donald Trump had intended to build almost a hundred-plus- story condo development down here in New Orleans, and it has been scaled back a couple of times. And those kind of things impact me as a contractor because we need new development and new projects to be ongoing so that we can continue to work.

BLOCK: Are you starting to think about any contraction of your business in terms of employees, might you have to let some people go?

Mr. MITTERNIGHT: We're keeping an eye on it. We haven't had to let anyone go yet, but we are - a year ago, have sons in the business, and we had plans and intentions of growing the business and expanding, and we've kind of drawn back a little bit our intent to expand. It's been put on hold for awhile.

BLOCK: So you're not growing?

Mr. MITTERNIGHT: Not growing at all. It's just to try to borrow money to do expansion - expansion to us means more marketing and adding service vehicles and service trucks. And to attempt to finance a new service vehicle right now, service truck, and usually with the service body and everything costs us within the vicinity of $30,000 plus. So to go into a finance situation with that when there's much uncertainty, we'll just sort of sit on that go button for a while.

BLOCK: Well, Mike Mitternight, thanks a lot. Appreciate it.

Mr. MITTERNIGHT: Thank you.

BLOCK: It's Mike Mitternight of Factory Service Agency Incorporated in Metairie, Louisiana. And finally, a pet supply store. The Dog Shop in Washington, D.C., sells toys and treats. It also trains and grooms pets. Owner Jane Huelle had to refinance her home almost two years ago to get the money she needed to start the business. She doesn't think she'd be able to do that now.

Ms. JANE HUELLE (Owner, The Dog Shop): Because the credit market is just not there. You know, I couldn't get that same loan today that I got, you know, two years ago. It just - they wouldn't do it.

BLOCK: How do you see the credit crunch affecting you right now?

Ms. HUELLE: Well, my credit line has been reduced, which is my safety net, which means now I have to be conservative going forward into the holiday season with my spending, because I now have to keep the safety net in my liquid capital account, whereas before, I could've, you know, spent a little more, got more objects in, but now I have to keep that in my account.

BLOCK: This is a credit line from?

Ms. HUELLE: Bank of America.

BLOCK: And how do you know it's been reduced? What happened?

Ms. HUELLE: They sent me a letter saying that they were reducing my credit line.

BLOCK: Is your credit OK? I mean, your credit is good, that's not why they cut back?

Ms. HUELLE: No, my credit is fine. You know, I pay my bills on time. It's not from anything I did. It's just economic times are bad, and so everything is getting tightened down.

BLOCK: Well, what did you think when you got that letter from the bank saying they were reducing your credit line?

Ms. HUELLE: Well, initially, I was like, well, OK, whatever, and then - you know, then you start thinking about it. You know, it's fine right now but you have to pay attention to every little thing you do. You know, everything becomes a vital decision, and so the stress level obviously goes way up.

BLOCK: Because you just don't have that cushion?

Ms. HUELLE: I don't.

BLOCK: Have you started thinking about, maybe I need to start cutting back on staff?

Ms. HUELLE: I haven't had to cut back on my staff. I have five employees, you know, but I do have to watch hours. I spend 12-hour days here because I can't afford to put somebody in for me.

BLOCK: Are you also starting to see effects from - on the customer side of things? People maybe who aren't bringing in their dogs for grooming as often, or just aren't spending the way that they might have been a year ago.

Ms. HUELLE: Absolutely. What I notice is instead of buying a bag of food and a toy, they're buying the bag of food.

BLOCK: No toy?

Ms. HUELLE: No toy.

BLOCK: There must be a lot of unhappy dogs out there without their toys, I'm thinking.

Ms. HUELLE: Or slightly less spoiled.

BLOCK: Maybe that's it.

Ms. HUELLE: Yeah.

BLOCK: Well, Jane Huelle, thanks for talking with us.

Ms. HUELLE: No problem, thank you.

BLOCK: It's Washington, D.C., pet store owner Jane Huelle, the last of our trio of business owners telling us how Wall Street's credit crunch has affected her business. We also heard from Mike Mitternight, who installs air conditioning in Louisiana, and Ray Ciccolo, who owns a chain of auto dealerships in New England.

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