Rick Davis, 59, has been planning for early retirement for several years, but in the last week, with a stock market plummet and a new credit crunch, he has adopted a wait-and-see approach.

Mr. Davis, a project manager in Unum’s individual disability department, wants to retire and begin an encore career as the small business owner in NASCAR public relations and niche marketing.

But the economy has him worried. His conservative 401(k) investments have suffered losses in the range of 6 percent to 8 percent over the year.

“I had pretty much made up my mind to retire in February of 2009 without any doubt. However, with this downturn and the losses in my 401(k), I may have to rethink that.”

Mr. Davis is among thousands of Chattanoogans feeling the financial pinch as Wall Street’s woes ripple through the local economy, eroding the value of investments and helping to make credit for home, car or business purchases more difficult for many marginal customers.

Staff Photo by Dan Henry
Herb Adcox Chevrolet sales consultant Ken Bryant, right, shows Cedric Dozier, center, and Chuck Pointer a new Malibu at the dealership off of Brainerd Rd. Thursday afternoon.

Local bankers and business owners insist that with a relatively stable, diversified economy, Chattanooga is better suited than many areas to weather the financial storm. Congressional approval this week of a financial rescue plan — combined with new business growth planned in the region from Volkswagen, TVA and Alstom Power, among others — also should help the local economy rebound in 2009.

“These challenges to the nation’s economy are primarily taking place on Wall Street, not Broad Street,” said Craig Holley, president of CapitalMark Bank in Chattanooga.

But the economic slowdown has taken its toll on Chattanooga. Even before the credit crisis forced a government takeover of Fannie Mae, Freddie Mac and AIG in the past two weeks, unemployment was up nearly 2 percent in the past year in metropolitan Chattanooga, Cleveland, Tenn., and Dalton, Ga. The three metro areas combined suffered a net loss of 5,410 jobs from August 2007 to August 2008.

So far this year, home sales are off by more than 18 percent in the Chattanooga area even while median home prices are down 2 percent and local foreclosures and bankruptcies have jumped by more than 20 percent over the same period in 2007.

Tightening credit

U.S. Sen. Lamar Alexander, R-Tenn., worried in a speech on the Senate floor last week that the tumult in the credit market was hurting Volkswagen’s access to credit financing, possibly hurting car sales and perhaps even plans for VW’s $1 billion plant in Chattanooga.

VW spokeswoman Jill Bratina countered that the company has plenty of credit and still plans to build its plant. But the tightening of credit did force the nation’s biggest Chevrolet dealer — Columbus, Ga.-based Bill Heard Enterprises — to close its 15 dealerships last week and lay off 2,700 employees in seven states, including Georgia and Tennessee.

Chattanooga Chevrolet Dealer Herb Adcox said most dealers are faring much better, but he said the current car market is one of the toughest he’s seen since he began selling automobiles more than a half century ago.

GMAC and banks have tightened credit for car buyers, making auto loans harder to get for some. High gas prices have discouraged sales of trucks and larger vehicles. Lease options have been curtailed by major car makers, and the slowing economy is discouraging many motorists from replacing their vehicles.

“It’s a lot to absorb at one time,” Mr. Adcox said. “But we’ve got some great deals right now for people wanting to trade.”

moving the market

While the economy is discouraging some buyers, it is providing better deals and spurring some consumers to consider buying.

Cedric Dozier, a 34-year-old Chattanooga Public Works employee, was looking last week for a new, more fuel-efficient car to replace his Buick LaSabre.

“I’d like to find a car that can help me save on gas and it looks like it’s a good time to buy with the employee pricing plan (from General Motors through the end of the month),” he said.

Tim Kelly, a Chattanooga car dealer for Cadillac, SAAB, Subaru and Hummer, said his business is faring better now than in the spring and he expects “things will brighten up considerably if Congress approves a rescue plan and gas prices and supplies get back to normal” following the disruptions caused by Hurricane Ike.

“This is not an economic crisis as much as a financial and liquidity crisis, and Main Street is really not in that bad of shape, especially in a market like Chattanooga,” he said.

business challenges

W. Allan Jones, chairman and founder of the Cleveland, Tenn.,-based Check Into Cash, said both his loan volume and bad debt are up this year for the first time since he started his payday business in 1993. Consumer anxiety about the economy has cut company revenues about 5 percent this year since many borrowers are more reluctant to take out short-term loans amid the current market uncertainty. Among those who do, a greater share aren’t paying them back.

“As much as I hate it, I think we’re going to have to have some kind of rescue plan,” Mr. Jones said. “But I am concerned about the whole mood of the country toward not taking individual responsibility and paying your bills. We have to change that attitude.”

Mr. Jones said his company has not suffered any liquidity problems so far or changed its credit standards for borrowers who typically take out two-week loans against their next paycheck from Check Into Cash. But with the sluggish economy and more defaults, Mr. Jones said he is looking at what to do with the 91 of the 1,293 Check Into Cash stores across the country that are now losing money.

downturn hits home

Tighter credit standards for home buyers, combined with a decline in many home prices because of higher foreclosure rates, also are trimming new residential developments.

Jay Bell, president of Bell Engineering Co., one of the largest real estate development companies in Chattanooga, said his firm is not starting any projects.

“We’re in a normal housing downturn in this market, but we still feel like we’re positioned well to get through this,” he said.

Jack Webb, a Crye-Leike Realtor and partner in the Fieldstone Farms development in Rock Spring, Ga., said Chattanooga didn’t enjoy as big of a housing boom in the past and isn’t now being hit with as hard of a downturn as most markets.

“There are some serious national economic problems right now that I hope can be worked out,” Mr. Webb said. But real estate is sold at the local level and I honestly feel that in metro Chattanooga we’ll be OK.”

In the meantime, Chattanooga financial adviser Richard Cox said he has been fielding calls for weeks from investors wanting explanations and reassurance.

“I’ve been practicing 32 years, gone through a lot of crises, but this one has been the most confusing and illogical,” he said, noting that the congressional bailout plan is probably just “a piece of the solution.

“We’ve got to get back in this nation to being a nation of savers,” he said. “Any nation that grows has to have a positive savings rate. Too many people are just living from paycheck to paycheck.”

For Mr. Davis, whose daughter is getting married this weekend, the impact of the market downturn has extended beyond his own retirement plans.

“We’ve tried to do a good bit of the preparation ourselves, to save money,” he said. “Of course, we have a photographer who’ll make pictures, but I had planned to buy a digital camera to take photos, too. If this bailout doesn’t seem to be shaping up well, I may forego the digital camera.”