NADA Headlines (Nov. 22, 2010)
2011? Might be Better Than You Thought
After two years of wrestling with a weak market, the auto industry is suddenly expecting a much stronger 2011 and beyond. Fears of a double-dip recession have eased, and not-so-skittish shoppers are starting to buy because they want to, not just because they have to. Credit is more accessible, dust from the election has settled, and there's growing sentiment that the logjam of pent-up demand has sprung a leak. "We're starting to see some of the pent-up demand release and some confidence coming back to the market," said Toyota brand boss Bob Carter. "We're starting to see 'want' purchases as well as 'need.'" Carter sees a "high 12 million" sales year in 2011, and Mark Fields, Ford's president of the Americas, said it might be 13 million. In 2012, look for 15 million U.S. sales, said Jeff Schuster, top auto forecaster for J.D. Power and Associates. Don Butler, Cadillac's vice president, and Jim O'Sullivan, Mazda North American Operations' CEO, see pent-up demand fueling growth. "People need to replace vehicles," O'Sullivan said. Butler said auto sales will jump quickly whenever U.S. unemployment drops. Read more from Automotive News.
Last week's wildly successful initial public offering of General Motors stock was a clear indication that the government bailout of the nation's largest automaker was worthwhile. The IPO raised about $23 billion, $13.6 billion of it for U.S. taxpayers; reduced the government's stake in the automaker to about 33 percent from 61 percent; and proved that investors have confidence in the changes made to restructure GM during its government-imposed bankruptcy. Even after the IPO, GM hasn't paid off all of the $49.5 billion taxpayers invested to keep the automaker afloat. For U.S. taxpayers to be made whole, GM must raise $26.5 billion through another stock offering, meaning the average share price would need to be about $53. It's possible. GM's financial results in an auto market that is far from perky suggest that when a real recovery happens the automaker will be very profitable. But even if the U.S. Treasury isn't repaid dollar for dollar, taxpayers likely will come out ahead. A study by the Center for Automotive Research in Ann Arbor, Mich., found that the $80 billion in federal aid to GM, Chrysler, GMAC and Chrysler Financial saved nearly 1.5 million jobs -- and $96.5 billion in personal income -- in the past two years. The net impact to the federal government -- in terms of transfer payments, personal income taxes paid and Social Security payments -- was a positive $28.6 billion, the study reported. It is distasteful and dangerous whenever government interferes in business. But sometimes it's necessary for the greater good of the economy. The GM bailout proved it. Read more from Automotive News.
DETROIT — It is out with the old and in with the new at General Motors as the federal government’s ownership stake in the company was cut in half this week. Even the automaker’s sign atop its corporate headquarters has gotten a makeover. G.M. has replaced the two-story, plastic block-letter logo on the front of its Renaissance Center complex in downtown Detroit with an electronic sign that shows vintage versions of the company’s name and initials. The removal of the old sign, with its simple blue-and-white rendering of the G.M. letters with a line underneath, was timed to coincide with G.M.’s initial public offering on Thursday. When the stock started trading, the lights on the 625-square-foot LED replacement were switched on. “We needed to freshen up our headquarters, and show people that G.M. is not the same anymore, that we are changing,” said Joel Ewanick, G.M.’s head of sales and marketing, who suggested the change. The company is planning other initiatives to warm up its image. Across the front entrance of the headquarters is a huge banner reading, “We are the new General Motors.” And this week, its Chevrolet division announced that it would invest $40 million in clean energy projects, like wind farms and solar technology, to reduce carbon emissions produced by the cars it sells. Read more from The New York Times.
Local barons see need for ‘Big Three’ to boost production
Boston car baron Herb Chambers said he had to “beg, borrow and steal” recently to scrounge up 200 Cadillacs for his Danvers dealership. “They’ve cut back production so much that we’ve run out of cars,” said Chambers, who bought some of his Cadillacs from dealers in other parts of the country with slower sales. The “Big Three” U.S. automakers - General Motors, Ford and Chrysler - have downsized so much over the past year that manufacturers can’t keep up with today’s demand, Hub car dealers say. According to WardsAuto.com, the average U.S. dealer had just a 75-day inventory of domestic cars and light trucks on hand during October, down from a 146-day supply in early 2009. “When we emerged from bankruptcy in July 2009, we restructured our business and got our capacity in line with what demand was at that time,” GM spokesman Tom Henderson said. “That’s a situation few dealers are used to, but it’s actually good for business.” Read more from the Boston Herald.
Automakers around the world are pouring money into developing a slate of hybrid, plug-in and electric vehicles, but pure EVs are expected to make up just a sliver of the global auto market in a decade's time. Pure electric vehicles-- which do not have an internal combustion engine and are plugged in to recharge-- will make up around 5 percent of the global auto market by 2020, some auto experts said. "The business model doesn't compute," BorgWarner Inc CEO Timothy Manganello said at the Reuters Global Autos Summit. "The more these guys make electric vehicles, the more money they are going to lose." One of the main stumbling blocks for the widespread adoption of electric cars is the price of the batteries, which Manganello said can cost between $10,000 and $14,000 to replace. "You are never going to have a low cost car as an electric vehicle," said Manganello. BorgWarner is a leading supplier of turbochargers and other engine and transmission components. Read more from Reuters.
Kia Motors Corp. will begin selling new vehicles through EBay Inc. as South Korea’s second-largest automaker looks to increase brand recognition in the U.S. with the help of the second-most visited e-commerce site. More than 300 of Kia’s 725 U.S. dealers are enrolled to list their inventory on EBay and kia.ebay.com, said Tom Loveless, Kia’s vice president of U.S. sales. EBay’s arrangement with Kia is similar to its new-vehicle promotion in California with General Motors Co. last year, which the automaker let expire after about eight weeks. “This exposes our brand to a percentage of the car-buying public that perhaps wouldn’t otherwise have considered us,” Loveless said in a telephone interview. Read more from Bloomberg.
ANNAPOLIS, Md. – Maryland Automobile Dealers Association recently celebrated its 100th Anniversary at a Black Tie event in Annapolis, Md. Guests enjoyed a fine dinner and dancing to celebrate the momentous occasion. The evening also served as the kick-off for the Association’s new charitable foundation, the Maryland Automobile Dealers Association Foundation. Proceeds from the evening generated almost $100,000 in funds for the yearling foundation which will fund automotive educational initiatives in Maryland. The evening closed with MADA Chairman Sam Weaver, Jr., of Chevy Chase Acura inducting the late L. Wilson Howes into the Maryland Automobile Hall of Fame. Mr. Howes represented the best among Maryland’s automobile dealer community. As part of the Foundation, MADA will annually induct a new member into the Hall of Fame. Read more from MADA.