BusinessWeek's Dee-Ann Durban had the pleasure of attending the Chicago auto show to get a feel for how the suits are feeling about the future. And the answer is… great! "We're beginning to see, after six quarters of declines, the beginnings of some pent-up demand," opined GMNA Prez Troy Clarke. "You could make a case that the second half of the year could be significantly better." Marketing Mark LaNeve agrees with his co-worker's "Annie" analysis. "We really believe the industry's going to be OK this year," LaNeve said. "We've had a fairly weak car market for the better part of two years. Economic weakness is being experienced in other places right now. We've already been in it." Ford's President de las Americas, Mark "Tool Time" Fields, was also optimistic, in a plausible deniability sort of way: "We do see opportunity in the second half." While you can easily file all this spinnery under "What else are they going to say?" one could make a case that when the going gets tough, Pollyanna should go away. Sense of urgency. That sort of thing.
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Right, add that to the list of things that will improve this year:
1. The housing market
2. Iraq
3. Iran
4. Healthcare
5. The world’s annual CO2 output
6. Donald Trump’s hair
etc….
I guess the logic is; if people aren’t buying houses they’ll have more money to buy cars. OK.
Yeah, unless the reason people aren’t buying houses is that their ARMs reset higher than the initial teaser rates, their home values are below their mortgage debt, and they can’t afford to own a home anymore.
Great atmosphere to consider buying a new F150, right? Better get the long bed model, so you can fit your matress in it.
The $300 rebate checks from BushCo are nothing. But a source of serious money might lie in the equity of those 35 families who haven’t yet refinanced their homes to 110% of market value. Their neighborhood banker should get in touch and offer ’em a free flat-screen TV to get ’em moving.
Or Congress could just mandate that the loansharks credit card companies raise everybody’s credit limit by $40,000. That should move a lot of new Malibus.
Or Congress could legislate a maximum vigorish interest rate that’s more reasonable than the 30% that many people now pay Citibank and that would free up a lot of cash flow to plow into imported Chinese crap Chryslers.
I trust the company VPs to spot upcoming economic trends based upon the foresight they had to spot the current one. This could go towards explaining why they’re so profitable.
Clarke said the majority of mortgages with adjustable rates will change over in the first two quarters of the year, and consumers have been planning for that.
Not any of the people I know who bought houses with ARM’s several years ago. They all bought the biggest most expensive house they could find and the teaser morgage was as much as their budget would allow sometimes more. And whenever I would ask what they were going to do when their morgage skyrocketed in 5 years it was “I’ll refinance, the house will be worth more and I can sell at a profit or I’ll be making way more money by then so double the morgage payment wont be a big deal.” Maybe there aren’t a lot of people with this flaud thinking but I doubt it from the over valued housing prices in Atlanta at the time.
This is my favorite: LaNeve said automakers were also much more disciplined in 2007 about the use of incentives, which tend to artificially pull sales ahead. So more buyers could be looking for a car this year after not getting a deal in 2007. Incentives averaged $2,366 per vehicle in 2007, down $42 from the year before, according to the automotive Web site Edmunds.com.
$42 is being disciplined.
I think what they are saying is entirely reasonable. As far as I know I’m the only person in the TTAC cosmos whose been willing to say that when these little blurbs are posted, and I’ll stick with it til I have reason to change my mind. We’ll see who’s right and who’s dead (movie quote). I say sales in 2008 will be at least 16.0 million (a decline, but a modest one).
Sales in January were down 2.9%. Bad huh? But sales in January 2007 were down 4.5% — maybe it’s getting less bad. If we just avoid the huge crashes we saw last April and last July it might not be that hard to reach stable sales.
Recessions (if and when they happen) usually last 6 months. Glory Be, GM is actually posting sales increases, and there most certainly IS pent-up demand by now, as new car sales have been declining in the face of a steady increase in population and number of households … just a question of how soon people will be willing and able to buy.
P.S., I’m almost certainly going to buy a new car this year — something I’ve only done twice before in my life (and I’m 41). So that’s one.
Didn’t the band play on during the Titantic’s sinking?
Its too early in 08 to make a call.I can say after surviving 35 winters at GM including the gas crunch of the mid seventys 80-82 and the early nineties.O8 is not shaping up too bad.
By early summer I see things picking up.
Course I’m a glass half full guy.
I appreciate their optimism. I’m retaining my own cautious version for the economy, but I trust MY company and self better than I trust theirs.
What a WEIRD photo. It strikes me like the photos you see of some portly shlub with a stained t-shirt and flip-flops standing in front of a Turbo Carrera – just reversed…
I don’t remember, and I’m too lazy to look up, the numbers we’ve all read about the unprecedented increase in house prices over 5 or so years during the period when the bubble was inflating. The price of the average house went up way more than income which means that either people had to get some serious raises, unlikely when offshoring is going full bore, or that we had a “correction” in our future. The raises didn’t come but the correction has and will. This is not going to be worked off in a year or so.
Nearly every day the WSJ has at least one article about an additional indicator of things getting worse. Yesterday I think it was about how banks who took a bite of a leveraged buyout deal are having to eat what they bit off because they can’t sell it to anyone. We’ve read a little about how much people are over their heads in credit card debt, and this is very expensive debt to have. Too many people in this country are just damn fools. They’ll borrow and spend whatever someone will lend them. And there have been too many damn fools willing to lend. Fannie and Freddie are products of the worst ideas I know of from the financial world. This thinking removed all incentive for the lender to be prudent. Give the person approving the loan incentive for approving loans, regardless of the chances of it being paid, give the appraiser incentive for appraising the property at the price the damn fool buyer agrees to pay, and give the real estate agent incentive for maximizing the transaction price and what would anyone expect to happen? Exactly what has happened. Even I could figure this out and the only thing that has surprised me is that it took so long to crash.
What has surpised me too is how many people who were paid to be smart about such things apparently weren’t. Take Cerberus for example. I read somewhere that Feinberg raised a question about the housing market when they were considering buying into GMAC, but I guess he was assured by whatever obviously wrong answer he got. And so many smart guys at Citi, etc. weren’t so smart either. Whatever virus that was going around in these circles might be related to the group-think virus that afflicted the car companies a few years ago when GM decided it just had to have a piece of Fiat, Ford had to have PAG, etc.
Of course there is an easy way to fix this and that involves having the tax payers bail everybody out. It works every time assuming the Chinese or others with lots of money would be willing to lend us enough to fix this. At some point though they might have doubts about lending to a bunch of people who are getting fatter and older by the minute, whose education system is crap, and who already owe them way too much.
I can only speak for myself on the idea of a new car purchase. I haven’t yet seen a deal low enough to get me into a new car. I suspect that I will realize at some point that the great deals are gone and the industry is back on track. At that point, I will not want to pay more than the deal I passed up earlier, and will instead keep my present car.
Basically, if there are lots of people like me out there, they are S.O.L.
Maybe if they offered something I really wanted and trusted.
It’s gonna be a great year. A great year, that is, for Toyota and Honda, the same as it has been for the last few years. And a bad year for the 2.8, just like the last few years.
We really have two auto industries: domestics and imports. They are totally disconnected now.
It reminds me of Herbert Hoover who was always certain that prosperity was right around the corner throughout his term in office.
mikey: I’m a glass half full guy.
I’m more of a glass half-empty guy, kind of like Janeane Garofalo who says:
“The glass is always half-empty…
And it’s cracked…
And I cut my lip on it.
And chipped a tooth… ”
And it’s bleeding down the side of the glass and into the water.
Kevin: 16 million vehicles may be sold this year, but 15.9 million may be Honda and Toyotas (a slight exaggeration I admit), but what good is it for the 28 if 16 million are sold if they keep losing market share, losing money and have to pay people big money to take the products?
Another subject: why is there always some suit standing infront of the new vehicles? Isn’t there any photos with some hot babe in front of, on top of or beside the vehicle? Please.
These suits are just clueless. They keep denying that they even have so much as a scratch, while they lose massive volumes of blood from the severed limb. Reminds me of Jim Carey’s portrayal of that fireman on “In Living Color”, oh, 20 years ago.
hltguy :
Another subject: why is there always some suit standing infront of the new vehicles? Isn’t there any photos with some hot babe in front of, on top of or beside the vehicle? Please.
Well, I’m most pleased know that I’m not the only one who was thinking of this very same thing when I saw the original article and picture.
Once in awhile, post a picture that I might actually want to click on for a larger image!
Please! :)
hltguy and zoomzoom,
I suspect that RF would prefer a pretty woman in the picture when he wants to show the car, but he might as well have a car in the picture when he needs to show the suit.
As for that white van the other day, there really was no need for that sort of thing ;)
Landcrusher :
hltguy and zoomzoom,
I suspect that RF would prefer a pretty woman in the picture when he wants to show the car, but he might as well have a car in the picture when he needs to show the suit.
As for that white van the other day, there really was no need for that sort of thing ;)
To Landcrusher: Hahahaha! Thanks for that (both comments); I really did laugh.