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NADA Headlines (Aug. 31, 2010)

U.S. Wants Report Card for Cars

System Would Rate Fuel Economy, Emissions; Industry Says Government Veers Into Issuing Opinions

WASHINGTON — The government proposed labeling each new passenger vehicle with a letter grade from A to D based on its fuel efficiency and emissions, part of a broader effort by the Obama administration to promote electric cars and other advanced-technology vehicles. The proposed new rules, released jointly Monday by the Environmental Protection Agency and the Transportation Department, would be the most substantial change in 30 years to the familiar price-and-mileage labels affixed to the windows of new cars at dealerships. Under the system, the only cars that would receive an A-plus, A or A-minus would be electrics and plug-in hybrids, the government said. Many compact and midsize vehicles would get Bs, while bigger and more powerful models such as sport-utility vehicles and pickup trucks would get Cs or C-minuses because they burn more petroleum and pump out more carbon dioxide, officials said. But the proposed changes —which come as the Obama administration enforces stringent new rules to boost overall fuel economy—were criticized by the car industry, which said the government would be crossing the line between requiring responsible advertising and making value judgments about vehicles. "The proposed letter grade falls short because it is imbued with school-yard memories of passing and failing," said Dave McCurdy, president of the Alliance of Automobile Manufacturers, the industry's largest trade group. A spokeswoman for the alliance added that "grades may inadvertently suggest a government label of approval." Read more from The Wall Street Journal.

Editor’s note: NADA opposes changes that would: (1) confuse the buying public; (2) make vehicle purchasing decisions more difficult; or (3) treat certain automakers or fuel types unfairly. NADA also believes that the Department of Transportation and EPA should avoid label changes that could result in a difficult transition period or that would not be "backward compatible." (By "backward compatible,” we mean that fuel economy information should be useful to car buyers shopping between new vehicles of different model years, between new and used vehicles, or between used vehicles of different model years.)

During the 60-day public comment period for the proposal, NADA will likely oppose any proposed label design that would mandate a letter grade for a vehicle’s overall fuel economy and greenhouse gas emissions performance. Instead, NADA will concentrate on the proposal’s second option, which retains the current label’s focus on miles per gallon and annual fuel costs, while updating its overall design and adding new comparison information on fuel economy and vehicle emissions. NADA does not support a mandate for the display of upstream emissions information associated with electricity generation or fuel refining.

Chrysler Seeks Fiat Dealerships in 165 U.S. Locations at Launch

DETROIT — Chrysler Group dealers who initially get Fiat franchises will be expected to start with small showrooms — 2,500-3,000 square feet — enough to display three or four cars. Such a small showroom will be sufficient to sell the Fiat 500 minicar, which will arrive in dealerships at the end of this year. Chrysler expects to initially name 165 dealers in 119 U.S. markets to sell the Fiat 500. The dealers were chosen from markets around the country that Chrysler has identified with strong growth potential for small-car sales over the next five years. “We have determined the areas of the country where they can succeed and grow,” Peter Grady, Chrysler's vice president for network development and fleet, said in a statement (Monday). David Kelleher, owner of David Dodge Chrysler Jeep in Glen Mills, Pa., described Chrysler's capital requirements as “reasonable.” “This is an opportunity to diversify yourself from being a high volume American brand dealer” into something different, “not competing and tripping over” other dealerships selling the same brands, he said. “That gives me diversity in my structure. That helps me weather some storms.” Read more from Automotive News.

U.S. Auto Sales May Hit 28-Year Low in August as Discounts Flop

U.S. auto sales in August probably were the slowest for the month in 28 years as model-year closeout deals failed to entice consumers concerned the economy is worsening and they may lose their jobs. Industrywide deliveries, to be released tomorrow, may have reached an annualized rate of 11.6 million vehicles this month, the average of eight analysts’ estimates compiled by Bloomberg. Consumers are avoiding showrooms as fear of a double-dip recession grows following the 27 percent plunge in existing home sales in July, said Mike Wall, an analyst for IHS Automotive. “When you’ve got that sentiment, that fear hanging over the market, it makes it a tough sell for consumers” to spend $25,000 or more on a vehicle, said Wall, who is based in Grand Rapids, Michigan. Sales in August have dropped from July at Carl Galeana’s three Chrysler dealerships in Michigan, South Carolina and Florida. “There’s still that psychology out there of doom and gloom,” he said. “People who are buying the cars now, need to buy a car. If you don’t need to buy a car, you’re probably sitting back.” Read more from Bloomberg.

No Deal: Buyers Will See Fewer Discounts for Cars

DETROIT — For years, Americans shopping for cars were treated to all sorts of deals and incentives, especially at the end of summer. Think Cash for Clunkers, which paid up to $4,500, or promotions that offered employee discounts to everyone. Those days are over. Deals are getting more scarce because automakers, newly lean and profitable, are holding the line on those profit-eating promotions. "This may be as good as it gets, and get used to it," says Jeff Schuster, the executive director of forecasting for J.D. Power and Associates. As a result, U.S. auto sales are at a standstill, with potential buyers waiting for more deals but automakers resisting. August usually sees strong sales as automakers offer deals to clear out the lots for new models. In August 2007, before the recession, automakers sold nearly 1.5 million new cars and trucks. Last August, when sales were at a 30-year low, the government came to the rescue. Cash for Clunkers, which paid buyers up to $4,500 per vehicle, boosted sales by about a third to 1.2 million. But this year, the government is on the sidelines, and so are many buyers. Read more from The Associated Press.

Rise in Car Sales, Consumer Spending Questioned

At first blush, a government report released Monday appeared to offer hope to the nation's struggling auto industry: New-car sales in July fueled an uptick in consumer spending, which had been wheezing for three straight months. But a closer look at those car sales raises questions about whether the auto market - and consumer spending as a whole - are indeed on an upward arc or whether they are just treading water. Jack Fitzgerald of Fitzgerald Automotive Group, based in the Washington area, said auto buyers are careful and unemotional compared with a year ago, when the "cash for clunkers" government program caused a big spike in sales. "I think you are seeing 'need' buyers," he said. "The average car on the road is 10 years old. You are seeing people are buying cars who need them. They might have traded sooner because they wanted something, but people are more cautious right now." But Tammy Darvish, vice president of Silver Spring-based Darcars, one of the largest auto dealership chains in the country, said consumer interest has heightened since last year, mostly because of the availability of cheap financing. "If you recall a year ago, credit was so tight and it was so difficult for people to get car loans," said Darvish, adding that almost no one is offering rebates and other profit-destroying incentives. "If you had a credit score under 600, [you] couldn't even stop into a dealership. Whereas now, there are many opportunities for those consumers to be financed." Read more from The Washington Post.

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