||Auto Industry Leaders Encouraged But Wary
Walking the crowded floor of the auto show in Detroit last week, Montana dealer Bill Underriner was thrilled with the new vehicles and encouraged by the industry's more positive mood. A new Buick small car. A sporty hatchback from Hyundai.
But all the same, Underriner, who sells Buick, Honda, Volvo and Hyundai, remains cautious.
"Last year," he said, "the conversation my customers were having was 'I need a car.' Now I'm hearing 'I want something new.' That's a positive change."
Positive, but like the comments of other auto executives, vendors and dealers at the Detroit show, it is hardly exuberant. And that is the current reality of the North American industry: 2010 bounced back from a dismal 2009 with new-vehicle sales moving ahead by 11 percent. But the business mood remains conservative and mixed. The Detroit 3 are more upbeat than the Asians.
"We had a great year at both Nissan and Infiniti," said Brian Carolin, senior vice president in charge of sales and marketing for both brands at Nissan North America. "And there is clearly pent-up demand out there. But we are still being very cautious. I wouldn't exaggerate the trend; there are still people struggling to get credit."
Hyundai Motor America's U.S. sales boss, Dave Zuchowski, was also restrained.
"I think last year there was a lot of wishful thinking that things were getting better, but no real tangible signs," Zuchowski said.
"People are going out and buying new cars again, they're starting to feel better about their prospects, and companies are hiring again."
But he added that high unemployment continues to hold back the market. He believes that recovery is in progress, but it will be a slow, gradual process with no magical lurches forward.
"I just think we need to be careful and not overreact to it," said Zuchowski, who managed Hyundai division's 24 percent growth in sales in 2010. "A slow, sustained recovery is the best way to do this."
The mood affects whether automakers will begin bumping up factory output to prepare for higher sales volumes.
John Mendel, executive vice president at American Honda Motor Co., said Honda is sitting on ample factory capacity, in case the industry adds another million sales in 2011. But nobody really knows whether that is likely to happen, he added, and so Honda is not ordering up more vehicles yet.
"We don't flex up and down lightly," Mendel said.
U.S. light-vehicle sales in 2010, 11.6 million, were still way below 2007's total of 16.2 million.
The domestic automakers, though, were noticeably upbeat at their hometown show.
"It was like a funeral here the last two years -- carpets, cars and nooses," said Mike Jackson, CEO of AutoNation, the country's largest dealership group. "Now, Chrysler and General Motors are just talking about product again. There is optimism and a feeling that the recovery is under way. It's a whole new year."
Last year, surging demand for the Chevrolet Equinox small crossover caught General Motors by surprise. The automaker bumped up production four times last year before finally catching up with demand in December, when Chevy posted its biggest Equinox sales month.
GM didn't want to get caught flat-footed on the September launch of the Cruze compact. The decision to start with three shifts at the Lordstown, Ohio, plant is allowing GM to meet brisk early demand. Chevrolet sold 10,865 Cruzes in December, just behind the Malibu, Chevrolet's best-selling car, at 11,520.
"Cruze is a great example of how we planned the business a little bit differently because of some of our experiences with Equinox in 2010, when we found out that we were now starting to go into a period of moderate growth," said Margaret Brooks, Chevy's small-car marketing director.
At Toyota Motor Sales U.S.A., Toyota Division General Manager Bob Carter is cautious about production. It is not time yet to turn up the pace at Toyota's factories on a permanent basis.
"We're sitting at about 275,000 units in dealer stock, and that's enough to be comfortable," Carter said. "That gives us a lot of buffer, but there is always overtime and Saturdays."
A trickier issue in the current sketchy market is planning the right trim mix on models that are built.
"The people who are buying are wealthier," noted Jim Farley, Ford Motor Co.'s top sales and marketing executive. "Part of this is because the subprime buyers are still largely out of the market."
Farley said this slant toward higher-end customers with good credit means that his factory orders are tending toward higher trim levels, especially on launch vehicles, such as the redesigned Explorer and Focus.
His observation was corroborated by Portland dealer Ed Tonkin, 2010 NADA chairman, as he sipped coffee at Bentley Motor's auto show booth.
"My market in Oregon is still in tough shape," Tonkin said. "It's still a challenging economy for a lot of people, and we're not in full recovery yet.
"On the other hand, our luxury stores are doing great. So you can see there's hope. But nobody's exhaling yet."
(Source: Automotive News, 01/17/11)
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