Final Inspection

It’s a Fine World After All

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It was mostly smiles at the NADA convention in Las Vegas, where everything seemed to be breaking the dealer body’s way for 2012.

Sorry Disney, but Las Vegas had to have been the happiest place on the planet last weekend.

And not because a lot of Giants-backers went home with more money in their pockets following Sunday’s Super Bowl game.

What I’m referring to is the crowd at the 2012 National Automobile Dealers Assn. convention, a group that may be about to go on a roll.

“It’s a great time to be a Ford dealer,” declares one retailer on his way out of the brand’s franchise meeting Saturday.

It’s easy to see why. Unlike two short years ago, nearly everything appears to be breaking in favor of the dealer body, with the U.S. economy slowly working its way out of its recession and a newly profitable Detroit pouring on the product.

Saab dealers, an all-but abandoned bunch that has as much right as anyone to be angry, could be the rule’s one exception. But even they made it through brand meetings without throwing chairs or tar-and-feathering company officials.

Ford executives predict total U.S. new-vehicle sales could reach up to 14.5 million units this year, a potentially profitable 1.5 million-unit run-up from 2011 levels. And it looks like the industry is better positioned to ensure there are no supply constraints to clog the pipeline from manufacturing plant to showroom floor.

Japanese auto makers are on their way to making “significant progress” in restoring their U.S. inventory following 2011’s natural disasters, notes NADA Chief Economist Paul Taylor, meaning Toyota and Honda dealers should be fully back in the game in 2012.

Pricing also looks favorable on all fronts. NADA suggests used-vehicle prices will peak later in the year, in turn fueling “a good new-car environment.” Low interest rates, expected to remain in force through 2013, and thawing credit lines will make it easier to attract and qualify buyers.

Sure the group has some concerns. Dealers say they are being squeezed too tightly on new-vehicle margins, first by the OEMs, then by the Internet, which arms consumers with detailed pricing data they can use to drive the hardest of bargains.

But there’s some good news here too. A more favorable vehicle mix is expected to help nudge margins upward this year, and there’s a glimmer of hope that as retailers get more sophisticated about electronic and social media, they’ll be able to turn the Internet to their advantage.

Even the biggest point of contention – unwanted pressure from OEMs to roll the dice on costly facility-upgrade programs – appears to be shifting in the dealers’ favor.

At the convention, auto makers already were responding proactively to a NADA study calling for more restraint on showroom remodeling. First and foremost, proposed outlays must make business sense, the group says, and OEMs should stop micromanaging everything from what architects dealers must use to what furniture they buy.

Hyundai Motor America CEO John Krafcik tells retailers he understands their concerns. “We want an appropriate level of brand specificity. We don’t want to specify the color of the grout in the bathroom.”

Ford hits all the hot-buttons in the NADA report, as well, revealing it is busy crafting a letter to be mailed this month explaining a new facilities policy that is voluntary, collaborative and flexible. CEO Sergio Marchionne tells media Chrysler also has “indicated a (new) level of flexibility” to dealers when it comes to retooling showrooms.

Dealers still express some panic over the coming 2025 U.S. fleet fuel-economy target of 54.5 mpg (4.3 L/100 km), saying that standard will price too many buyers out of the market. That too, may turn out OK, though, advises Marchionne.

“I am confident that, if we unleash our engineering talent, we can achieve sustainable mobility without sacrificing our customers’ desire for vehicles that meet their transportation needs and are a pleasure to drive,” he says in a keynote speech to the convention.

Later, the Chrysler CEO tells reporters he was trying to calm the dealer group down a bit. “I mean, how can you tell in 14 years we won’t make that target? We have to give the tech guys an opportunity to keep developing this.”

I’m not sure whether Marchionne’s pep talk changed any minds. But if this past weekend is any indicator, it’s doubtful dealers will let worries over 2025 ruin the party in 2012.

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WardsAuto editors share insights and observations on the global auto industry.

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Dave Zoia

As Editorial Director, I oversee much of what goes into WardsAuto.com, enjoying a ringside seat that lets me observe up close just about every facet of the industry worldwide. I have covered the...

James M. Amend

James Amend is an associate editor at WardsAuto.com, covering day-to-day business and product news at General Motors. He also leads coverage of regulatory and environmental issues, as well as the...
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