By James M. Amend
Ward's Dealer Business
Detroit — With U.S. gasoline prices currently at $3 a gallon and growing consumer awareness of environmental issues, small cars should be the U.S. auto industry's hottest segment.
Not quite yet, says GM Chairman and CEO Rick Wagoner.
“It's been sort of surprising,” Wagoner says during an interview at the auto maker's headquarters here. “We haven't seen a radical shift.”
Sales of small cars in the U.S. through November were relatively flat, up 0.7%, or 16,403 units, to 2.3 million compared with year-ago, according to Ward's data. The segment accounted for 15.9% of the total light-vehicle market in the U.S., up from 15.4% in like-2006 but still fourth behind midsize cars, cross/utility vehicles and pickup trucks.
The lower small-car sub-segment, however, has been doing well. U.S. sales through November jumped 35.4% to 338,675 units from prior year's 250,072, Ward's data shows. But that was due mostly to an influx of new product such as the Honda Fit, experts suggest, and only accounts for 2.3% of total industry light-vehicle sales.
Meanwhile, the volume-leading upper small sub-segment, which includes vehicles such as the Toyota Matrix and Mazda3 5-door, saw deliveries fall 3.7% to 1.8 million units in the period from year ago's 1.9 million units.
Wagoner blames a weak economy, which has caused lower-income families to postpone new-vehicle purchases.
“You lose more sales at the bottom of the market because the people buying the smaller category of vehicle are buying it because that's what they can afford,” he says.
Should gasoline prices remain elevated for an extended period of time, the long-anticipated shift to small cars could occur, Wagoner admits.
Auto makers should begin building more compelling vehicles for the segment, says Brett Hoselton, an analyst with KeyBanc Capital Markets.
He points to Europe, where small cars draw buyers for their value and fuel economy but don't sacrifice features.
“In Europe, buyers don't have to sacrifice content,” he says. “In the U.S., as the euphemism goes, you're not going to get the heated seats.”
Wagoner says GM's options for building a premium small car for sale globally are becoming greater and more cost-effective than ever before.
The Saturn Astra is one example. GM will import the car from its Adam Opel GmbH subsidiary for sale in the U.S. next year as a test of how American drivers take to cars with a decidedly European flavor.
It also will demonstrate whether Saturn can compete with brands such as Volkswagen and Honda, rather than “more modestly positioned” names, Wagoner says. “It's an important step in that direction.”
Monday, January 7, 2008
Where's that Small-Car Shift?
New Year Brings Harsh Realities
By Drew Winter
WardsAuto.com
CommentaryIt started out innocently enough as a conversation about Christmas gifts. “People my age value experiences over material things,” my 21-year-old told me.
I assumed he was just politely asking for cash and didn’t think much of it.
Then, during a recent meeting with Ward’s editors, Ford sales analyst George Pipas used almost exactly the same words to explain the entire Millennial generation, people born between the late 1970s and late 1990s, feel the same way my son does.
In other words, the children of Baby Boomers do not aspire to vehicle ownership like we did.
Instead of daydreaming about buying a Ford Expedition they can use for camping trips with friends and family, many Millenials may want to rent the big SUV for just the camping trip, Pipas explained. The vehicle is just another element of the experience, not the foundation for it.
The next weekend they might rent a canoe.
That sent a chill down my spine.
Millenials, otherwise known as Gen Y, or Echo Boomers because they are the children of Baby Boomers, are the linchpin of most optimistic long-term automotive growth forecast.
Numbering about 75 million in the U.S., alone, they are the largest and most influential demographic since their parents.
They have been the apple of every mass-marketer’s eye for the past 10 years and are predicted to be a major driver of new-vehicle sales.
Based on the assumption that Millenials and even younger generations would exhibit the same buying patterns as their parents, Jim Press, then president of Toyota Motor Sales U.S.A., used to predict the U.S. eventually would see 20 million annual sales, far exceeding 2000’s 17.4 million record.
In 2005, Press told attendees at the Management Briefing Seminars in Traverse City that he loved to visit hospital maternity wards. “Every one of those little baskets is 20 purchase cycles,” he said.
Toyota still is doing well. It is battling GM for global dominance, and Ward’s forecasts it will eclipse Ford for the No.2 spot on the full-year U.S. sales chart.
But there has been little talk of 20 million-unit years lately. Ward’s is expecting 2007 sales to end up at a little over 16 million units.
The housing crisis, tough new fuel-economy legislation and sagging consumer confidence have most forecasters predicting 2008 will be an even weaker sales year.
And now wrong assumptions about future buying behavior may pull the rug out from under rosier long-term forecasts.
According to most recent studies, the average college student now owes about $20,000 in student loans at graduation, virtually assuring that a new-vehicle purchase will not top many recent grads’ to-do lists. Now some forecasters such as Ford’s Pipas are suggesting these future consumers may not even want a new vehicle, even if they can afford one.
It all points to a very sobering beginning for the New Year.
Then again, many Boomers will remind that they started out rebelling against the materialism of their parents, and then 20 years later became card-carrying members of the Me Generation, the most conspicuously consumptive generation ever.
But the credibility of the source is, unfortunately, suspect. Remember, you can’t trust anyone over 30.
Sunday, January 6, 2008
Late Payments on Consumer Loans Rise
By JEANNINE AVERSA
WASHINGTON (AP) — Late payments on a cluster of consumer loans, including those for autos, home improvement and certain home equity loans, climbed in the summer to their highest point since the country's last recession in 2001.
The American Bankers Association reported Thursday that the delinquency rate on a composite of consumer loans increased to 2.44 percent in the July-to-September quarter. That was up sharply from 2.27 percent in the previous quarter and was the highest late-payment rate since the second quarter of 2001, when the economy was suffering through a recession.
Payments are considered delinquent if they are 30 or more days past due. The survey is based on information supplied by more than 300 banks nationwide.
Late payments on credit cards, meanwhile, dipped during summer.
The delinquency rate on credit cards dropped to 4.18 percent in the third quarter, down from 4.39 percent in the second quarter.
The association's quarterly survey of consumer loans painted a mixed picture of how people are managing their debt. It suggested that some people feel more squeezed than others.
A severe housing slump and weaker home values have clobbered some homeowners — making it difficult, or even impossible for some to pay their monthly mortgages. Foreclosures surged to record highs and more homeowners fell behind on their payments during the third quarter of last year, the Mortgage Bankers Association reported last month.
A drop in home prices left some people stuck with balances on their home mortgages that eclipsed the worth of their home. Others got burned when low introductory rates on their mortgages jumped to much higher rates, which they couldn't afford.
"Consumer loans directly related to the housing market were hit the hardest," said James Chessen, chief economist at the American Bankers Association. "We anticipate delinquency rates will continue to rise on these types of loans in the fourth quarter of 2007, reflecting continued weakness in the housing sector."
Late payments on home equity lines of credit jumped to 0.84 percent in the third quarter. That was up from 0.77 percent in the second quarter and was the highest since the final quarter of 1997. The delinquency rate on home-equity loans in the third quarter rose to 2.28 percent, a two-year high.
Meanwhile, the delinquency rate on "indirect" auto loans — which are arranged through dealerships — jumped in the third quarter to 2.86 percent, a 16-year high.
Saturday, January 5, 2008
Kbb.com: Car shoppers cut spending due to gas prices
Kbb.com: Car shoppers cut spending due to gas prices
New-vehicle shoppers plan to adjust their shopping habits due to high gas prices, spending less money on themselves so they can still give to others during this holiday season, according to the latest Kelley Blue Book Marketing Research study (www.kbb.com). The December 2007 results reveal that 44 percent of in-market new-vehicle shoppers are looking at cars they normally would not have considered due to the pain at the pump. An example of this is a notable shift in vehicle segment consideration from just two months ago, with increased interest in less expensive and more fuel-efficient transportation including crossovers, sedans and hatchbacks, and declines in SUV interest.
With a gallon of unleaded gasoline currently hovering at more than $3 in most parts of the country, 67 percent of those in the market for a new vehicle indicate they will not spend less on holiday gifts this year due to the rising cost of gas. However, more than 40 percent of consumers do say they are eating out less often and nearly 50 percent of consumers say they are doing less shopping of non-essential retail items such as clothes and shoes; further examples of consumers cutting back on self-spending. According to new-car shoppers, the largest shift in personal spending includes delaying the purchase of a new home, which more than doubled from October to December.
“While gas prices are clearly influencing the way consumers plan to spend money on themselves, such as going out to eat and delaying the purchase of a new home, it appears most people will not let the price of gas affect their holiday spirit and giving to others,” said Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book and kbb.com. “Based on our monthly study, shoppers are willing to sacrifice in order to still give to others, and it even extends to their next new-vehicle purchase. We are seeing more and more new-vehicle shoppers looking at smaller and more fuel-efficient cars than in the past. ”
When asked how gas prices have affected which vehicles they are considering, more than half of consumers say they would seriously consider a vehicle with higher fuel efficiency if gas prices were to increase as little as 50 cents per gallon. Among those looking to buy a new hybrid vehicle, shoppers say they are most interested in the Toyota Camry hybrid and the Honda Civic hybrid.
“Determining how gas prices affect consumer shopping provides tremendous insight into shifts in the economy, and tracking their opinions of alternative fuel solutions sheds light on the possible adoption and acceptance rates of alternate fuel systems in the future,” said Rick Wainschel, vice president of marketing research and brand communications for Kelley Blue Book. “Timely, in-market vehicle shopper feedback can provide invaluable information to automotive manufacturers and marketers, allowing them to tailor their messages and strategies more toward what car shoppers actually think and how they plan to spend their money.”
The latest Kelley Blue Book Marketing Research study was conducted on Kelley Blue Book’s kbb.com among in-market new-vehicle shoppers during the first week of December 2007.
Friday, January 4, 2008
GMAC Insurance Unveils Innovative Solution
GMAC Insurance Unveils Innovative Solution Targeting 30% Increase to Dealer F&I Revenue
GMAC Insurance Group
SOUTHFIELD, Mich., Jan. 3 — GMAC Insurance today introduced the latest additions to its innovative suite of technology-based solutions for automotive dealers. Combined with ongoing training and support, IntelliMenu(SM) and IntelliTracker(SM) provide a state of the art, custom- designed, menu-selling process with the potential to increase dealership F&I revenue by 30 percent on average.
"During the last several years, dealers' profit margins on new vehicle sales have become increasingly slimmer," said Tom Callahan, executive vice president of GMAC Insurance's Dealer Products & Services group. "Our integrated menu-selling process will help dealers remedy that trend. First, it will provide dealers with unprecedented and complete access to all of the tools and training necessary. And second, by enhancing customer awareness of F&I product offerings, we expect the solution will ultimately result in significantly improved penetration and revenue."
GMAC Insurance is providing this service through a partnership with menu- selling technology leader MenuVantage.
"We are proud to be working with GMAC Insurance on this unique, integrated dealer solution," said Phil Battista, co-chief executive officer of MenuVantage LLC. "On average, dealerships with our system have seen a 30 percent increase in F&I revenue. By combining our technology expertise with GMAC Insurance's complete support package, dealers can expect unparalleled service and results."
By capitalizing on MenuVantage's proven platform, IntelliMenu also will provide dealers with an interface approved for ADP's dealer management system (DMS) and certified for Reynolds and Reynolds' DMS. These interfaces allow MenuVantage access to a dealer's DMS using standard data interfaces and help ensure dealer information security, privacy, confidentiality, integrity and supportability.
The company will also supply GMAC Insurance with technology support and development expertise for future upgrades and improvements.
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IntelliMenu and IntelliTracker are big departures from the industry norm. While the majority of competitors traditionally focus solely on products, GMAC Insurance is redesigning its entire portfolio of offerings around dealer- focused solutions - integrating F&I products with on-going dealership training and best-in-class tools to provide a complete, packaged solution.
"Our business model is built around developing products, services and training that address specific issues raised by our dealer-customers. IntelliMenu and IntelliTracker were both born out of our ongoing conversations with dealers," said Callahan.
By integrating with major DMS providers, web-based IntelliMenu provides a seamless sales transaction, giving dealerships an easy, affordable way to structure multiple deals in the F&I office. IntelliMenu further assists dealerships with disclosure needs, allowing dealers to show every customer a complete listing of product offerings, while providing a record of acceptance or decline.
IntelliTracker integrates with IntelliMenu providing dealers and their GMAC Insurance account executives with up-to-the-minute information on F&I sales results. An individually tailored approach to maximizing sales is then jointly developed based on the needs of the dealer, and any necessary training is immediately set-up.
The entire process will be made available to dealers in mid- to late- January. Dealers interested in more information can contact their GMAC Insurance representative. Additionally, reps will be available to demonstrate these new solutions in GMAC Insurance's booth at the National Automotive Dealers Association (NADA) Annual Convention on Feb. 9-12 in San Francisco.
"I encourage every interested dealer to stop by the GMAC Insurance booth," said Callahan. "While there is no silver bullet to address dealer needs, we believe GMAC Insurance can offer real solutions with the depth and breadth of our products and proven F&I capabilities."
About MenuVantage
MenuVantage, based in Orlando, Fla., provides automotive dealers with best in class F&I tools to ensure compliance and increased per unit profit. The MenuVantage system offers F&I departments the most advanced technology available on the market today to increase F&I sales. It is also capable of the electronic submission of warranty and F&I products to providers, real time service contract rating, and the dynamic printing of documents on regular paper. Founded in 2003, MenuVantage has enjoyed tremendous growth and currently services more than 2,500 users at automotive dealerships in over 42 states nationwide, processing more than 70,000 deals per month. MenuVantage can be reached on the web at http://www.menuvantage.com.
About GMAC Insurance
The GMAC Insurance Group is part of GMAC Financial Services, a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC's insurance operations were first established in 1925, and now offer a wide range of products to meet the needs of retail consumers, dealers and business partners. For more information, please visit www.gmacfs.com.
SOURCE GMAC Insurance Group
Thursday, January 3, 2008
San Fran - greenhouse gas emissions.
State sues EPA to force waiver over greenhouse gas emissions.
Thursday, January 3, 2008
California led 15 other states and five environmental groups into federal court Wednesday to challenge the Bush administration's refusal to let the state limit vehicle emissions of gases that contribute to global warming.
In a lawsuit filed in San Francisco, the state accused the Environmental Protection Agency of exceeding its authority when it barred California last month from enforcing limits on cars and trucks starting with the 2009 model year, the first law of its kind in the nation. The state needed the EPA's approval to implement clean-air standards that are stricter than federal rules.
"The EPA has done nothing at the national level to curb greenhouse gases, and now it has wrongfully and illegally blocked California's landmark tailpipe emissions standards," state Attorney General Jerry Brown said at a news conference in San Francisco.
He said EPA Administrator Stephen Johnson had offered no coherent legal explanation for his Dec. 19 refusal to let California act and accused President Bush's appointee of merely "doing the bidding of the auto industry."
The lawsuit was endorsed by Gov. Arnold Schwarzenegger, who said federal regulators were "ignoring the will of millions of people who want their government to take action in the fight against global warming."
The federal veto affected as many as 19 other states that have adopted California's standards or indicated their intention to do so, including the 15 that joined the lawsuit filed Wednesday with the Ninth Circuit Court of Appeals in San Francisco.
Other California political leaders chimed in, including Democratic Sen. Dianne Feinstein, who chairs a Senate subcommittee on the environment. She cited reports in The Chronicle and other news outlets that Johnson had ignored his legal staff's recommendation to grant California the waiver and asked the EPA's inspector general to investigate the decision.
"The thought has occurred that this was a political decision rather than an environmental decision," Feinstein said.
In response, EPA spokesman Jonathan Shradar cited Johnson's position that a national approach to the problem is better than state-by-state regulation. He noted that Bush had just signed legislation that requires makers of cars and trucks to increase fuel economy to an average of 35 miles per gallon by 2020.
"We now have a more beneficial national approach to a national problem, which establishes an aggressive standard for all 50 states as opposed to a lower standard in California and a patchwork of other states," Shradar said.
California's law, passed in 2002, established limits on auto emissions of carbon dioxide and other gases that scientists consider to be among the major causes of global warming. The law was scheduled to take effect with the 2009 models and would require automakers to reduce their 2016 fleets' emissions by 30 percent.
A federal judge in Fresno upheld the law last month, rejecting automakers' arguments that the law would interfere with exclusive federal regulation of fuel economy and would make new cars dangerous and unaffordable. But the state still needed EPA approval to enforce the law.
The federal Clean Air Act allows California, because of its smog problems, to enact air-quality rules more stringent than the national standard if the state gets a waiver from the EPA. The agency had approved about 50 waiver applications without a denial since the law took effect more than 30 years ago.
The greenhouse gas case was different, because California and the states that followed its lead were implicitly challenging Bush's policy of relying on voluntary industry action, rather than mandatory limits, to reduce greenhouse gas emissions.
After considering California's request for two years - finally prompting California to file another lawsuit seeking a prompt ruling - Johnson denied a waiver last month. He cited the newly signed federal fuel-economy law and also said the state didn't qualify for a waiver because greenhouse gases are not unique to California.
But the state and environmental groups said the EPA has regularly granted waivers to California to address air pollution problems that were not unique to the state.
In addition, "no other state can claim the same wide range of severe impacts that California faces: melting of the state's snowpack ... increases in catastrophic wildfires, worsening of dangerous smog levels and other harms," said attorney David Doniger of the Natural Resources Defense Council, one of the five advocacy organizations that went to court along with California and the other states.
California and its allies also disputed the EPA's assertion that the state law is weaker than the new national fuel-economy standards.
The EPA's Shradar said the federal agency estimates that manufacturers could comply with the California law by achieving an average of 33.8 mpg in their new cars and trucks by 2016.
But Mary Nichols, chairwoman of the state Air Resources Board, said studies by board staffers concluded that the California law would require a fleet average of 44 mpg by 2020 and would reduce greenhouse gas emissions in the state by about twice as much as the federal law.
"Frankly, this is not very surprising because California standards start earlier, go faster ... and the end points are more stringent," Nichols said.
Brown's office had said earlier that federal law required the lawsuit to be brought in the U.S. Court of Appeals in Washington, D.C., a more conservative court than the Ninth Circuit. Brown said Wednesday that Johnson's letter rejecting California's waiver did not refer to the controversy as a nationwide issue - which would have sent the suit to Washington - and instead referred only to conditions in California.
Brown said he prefers the Ninth Circuit because its record in environmental cases "has been more closely aligned with how we interpret the law." That may not matter in the long run, he added, because the case could wind up in the U.S. Supreme Court.
Chronicle staff writers Matthew Yi and Zachary Coile contributed to this report. E-mail Bob Egelko at begelko@sfchronicle.com.
This article appeared on page A - 1 of the San Francisco
