43
Valley sees cash influx BONUS BONANZA
Auto and farm dealers have been among the early beneficiaries of oil and gas revenue that has come to the Mahoning Valley.
It is too early to quantify how much the impact has been, but John Kufleitner, owner of Columbiana and Salem Chrysler Jeep Dodge, said that in terms of sales growth, the Salem location is the top store nationally and Columbiana is in the top five. Shale bonus checks are part of the reason.
The purchases are not simply limited to trucks for farm work, he said.
“They’re walking in and handing us a big down payment and they’re telling us a story,” Kufleitner said. “They’re telling us about the tractor they bought or the pole building they put on their property.”
It has been good to see people excited about the local economy again, he said.
Typically, Columbiana Ford sells more used cars than new, but because of the lease bonuses people have received, new-car sales have moved ahead, said owner Terry Poulton.
At least 10 percent of the dealership’s business is due to people with lease money. Those with the lease money are buying new vehicles as opposed to used, he said.
“Where we used to see down payments of $500, now we’re seeing $5,000,” Poulton said.
Sales are expected to continue increasing, Poulton said. Over the next few years, the company has estimated its new-car sales may double due to oil and gas payments.
“We expect to be really big, but we’re taking baby steps right now,” he said.
Most of the people who received these bonuses are used to living on a budget, so they are going to be smart about how they spend it, Poulton said.
“This is a conservative community. A lot of people are still waiting to do anything until drilling starts and they see if royalty payments are going to start coming in,” Poulton said.
Steve Chos, vice president of the Automobile Dealers Association of Eastern Ohio, said he has heard anecdotally about an increase in sales due to shale money in Columbiana County.
The increase in sales does not appear to have traveled north to Mahoning County. There has been very little activity with commercial vehicles, and a few people have come up from Columbiana County and stated they have lease money, said Nick Amendola, commercial sales manager for Greenwood Chevrolet in Austintown.
“We don’t pry to ask them if they received bonus payments, but some of them will tell us,” he said.
The expectation is commercial-fleet sales will increase as more wells are drilled in the area, Amendola said.
“We don’t know yet if these companies will purchase locally or buy elsewhere,” he said.
Amendola said he believes these groups will buy fleet vehicles when working in the area — if something breaks down. They’ll need a vehicle quickly and use a local dealership.
Farm equipment has been one of the items that has had an increase in sales due to people with bonus payments.
Elder Equipment in East Palestine can attribute as much as 25 percent of its sales in the past years to people who have received lease bonuses for mineral rights, said C.H. McCutcheon, general manager and part owner.
“It hasn’t been so much the traditional farmer. They bought new equipment last year using crop money. It’s been the weekender or part-time farmer. The guy who makes his living from another job, but farms because he likes it,” he said.
Most of the purchases are for tractors or Gator utility vehicles, McCutcheon said.
It is not clear at this time if royalty payments will help to maintain the increase in sales, he said. “I’ll withhold judgment until I see progress in pipelines, the Cracker facility, processing facility and other infrastructure,” McCutcheon said. “We’re still in the infancy of the infrastructure.”
Throughout the process, there has been competition between auto dealers and other farm-equipment companies to gain customers due to the lease payments. These people have more money, but they are still being cautious about how they spend it.
“It’s not just easy money,” McCutcheon said.
In terms of dealing directly with the oil and gas companies in the area, vehicle sales have not been a significant part of the equation.
Kufleitner said his company has not yet made inroads into selling trucks to the companies operating in the drilling process.
The companies will say they are loyal to the dealerships where they are from, he said.
“We’re hoping with good service we’ll build their trust,” Kufleitner said.
Poulton said he also has had an increase in service work for vehicles owned by the energy companies.