CAR TALK GOES TO SAN FRANCISCO: What's next? dealers ask
0-percent bargains can't last forever
January 31, 2003
BY JEFFREY MCCRACKEN AND JOCELYN PARKER
DETROIT FREE PRESS BUSINESS WRITERS
So, 0-percent financing came along and reignited the auto industry. The chance to buy a car or truck with no interest began after 9/11 and kept sales hot through much of 2002.
OK. Great. What now?
"I've got to be honest, I lay awake at night asking that same question. Personally, it keeps me up at night wondering what we can do next," said Mike Kennedy, who has four Ford dealerships and a Chevrolet dealership near Philadelphia and is chairman of the Ford Dealer Council.
"I mean, what do you do for an encore? Soon, we need to get off this incentive drug. It can't last forever."
With that concern and others in mind, Kennedy and about 25,000 other U.S. auto dealers will converge on San Francisco this weekend for the National Automobile Dealers Association convention. The 86th annual convention is a time when dealers get together for various training sessions and have meetings with automakers and each other to discuss the industry's priorities.
Top auto executives make the pilgrimage to the annual convention, knowing happy dealers -- or at least successful ones that have lots of customers -- often mean the automaker is doing well.
Ford Motor Co. Chairman and CEO William Clay Ford Jr. will open the convention Saturday afternoon with a speech to dealers. General Motors Corp. CEO Rick Wagoner and other top executives will attend.
Spurring auto sales, especially now that consumer confidence is low amid the threat of war, is always a hot topic for dealers.
"We've had to create demand with 0 percent. December was brisk in sales, but we need some new Ford products to interest people. We don't want to lose any more market share here at Ford," said George Gorno, president of the Gorno Brothers Ford dealership in Woodhaven. "Spurring demand is a concern we've all voiced."
Gorno echoed the sentiment of many Ford dealers who are worried about the lack of new product from the Dearborn automaker. The F150 pickup is the only major new offering this year. That topic will be a high priority this weekend, especially because the automaker's CEO will be in San Francisco.
Industrywide, auto sales in 2002 slipped to 16.8 million. It was a strong year, but sales were down from 17.1 million in 2001 and 17.4 million in 2000. This slip occurred despite higher incentives in 2002.
In 2001, average incentives started the year around $1,200 per vehicle and peaked at $2,000 right after the Sept. 11 terrorists attacks. In 2002, average incentives started at $1,540 per vehicle and topped out at $2,355, according to the auto research firm Autodata Corp.
"There's always peaks and valleys, but in this business we can't, we won't, accept lows," said Bill McSkimming. He's a Chrysler-Jeep dealer near Chicago and chairman of the Chrysler-Jeep Dealer Council, which represents about 2,500 dealers nationwide.
"Our biggest issue is figuring out what's next. No one is excited anymore by 0 percent at 60 months. We've got to get people in the showrooms again," he said.
Shrinking warranty business is another worrisome trend likely to spark discussion, because as car and truck quality gets better, they they need fewer repairs, dealers say.
Chuck Fortinberry, owner of Clarkston Chrysler-Jeep, estimates that service and parts repairs are down roughly 30 percent in the Midwest and that could affect dealer profits.
Also hampering dealer profit is that fact that automakers are reducing the amount of time allotted for dealers to make repairs on vehicles. The manufacturers have established a labor rate manual that tells dealers how much time they have to fix a problem, and they are cutting back those times.
"They print books, but they don't study these repairs," Fortinberry said. "A lot of these times aren't exactly fair."
Another issue sure to be discussed -- perhaps contentiously -- at NADA is the Chrysler Group's plan to merge some Chrysler, Jeep and Dodge dealerships.
Dealers for the Chrysler Group say the plan -- code named Project Alpha -- is especially worrisome to smaller dealers, who feel they might get pushed out by Chrysler.
On a brighter note, GM dealers are feeling a higher level of satisfaction this year after another healthy year of sales and a steady stream of new products rolling into dealer showrooms. GM increased its share of the market for the second straight year last year -- the first back-to-back increases since 1976 -- thanks in large part to incentives and strong sales of trucks and sport-utilities.
"Things are very upbeat for GM dealers," says Russ Shelton, owner of Shelton Pontiac-Buick in Rochester Hills.
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....