Automotive News - April 14, 2008 - (Page 3)

APRIL 14, 2008 • 3 82nd year — No. 6303 Locals closer to GM strike DETROIT — Three UAW locals in Michigan on Friday moved a step closer to striking General Motors plants over local grievances. Locals in Warren, Flint and Delta Township, near Lansing, have told GM they could strike within five days unless their disputes are settled, GM spokesman Dan Flores confirmed. The Lansing Delta assembly plant makes the Buick Enclave, GMC Acadia and Saturn Outlook crossovers. That UAW local could strike as early as Thursday, April 17. The Warren plant makes transmissions, while the Flint plant makes medium-duty commercial trucks. Warren could strike Thursday as well and Flint on Friday, April 18, Flores said. Those locals want contracts that define work rules and other factory issues not dealt with in the UAW’s master contract with GM, signed last fall. Analysts have speculated that the locals are trying to draw GM into strike negotiations at American Axle & Manufacturing Holdings Inc. by hitting key GM assembly plants (see story, Page 1). The 2-month-old American Axle strike has closed mostly light-truck production at GM. — David Barkholz Poll: Dealers scrounge for cuts Retailers slash costs by cutting staff, inventory, vendors and advertising David Kushma dkushma@crain.com Tighter belts Other cost-cutting measures dealers say they are taking Deferring maintenance and capital improvements Making dealerships more energy-efficient Shortening dealership operating hours Eliminating charitable contributions Cutting back on travel, meals, company cars and other employee perks Charging service customers for loaner vehicles Consolidating central office functions among several dealerships Source: Automotive News survey Valeo CEO: No breakup TOKYO — Valeo SA CEO Thierry Morin called talk of breaking up the company “nonsense” and accused activist shareholder Pardus Capital Management LP of pushing the strategy for its own ends. “The idea of dismantling the company is, in my mind, nonsense,” Morin said here Friday. “This strategy is certainly not good for the company, for clients or other minority shareholders.” Management at the French auto parts supplier has been feuding with U.S. hedge fund Pardus over a plan forwarded by Pardus to sell Valeo’s units. According to news reports, Pardus wants to use the proceeds to buy Visteon Corp.’s climate-control division or Japanese thermal system supplier CalsonicKansei Corp. — Hans Greimel Bob Ryan, a Chevrolet and Cadillac dealer in suburban Minneapolis, kept his dealership profitable during a dismal first quarter. It wasn’t easy. He ordered fewer new vehicles, especially trucks, from General Motors. He didn’t fill job vacancies. He cut other spending. Without such economies, Ryan says, he’d be in the red now. Ryan predicts “things will get better” as car buyers take advantage of lower interest rates generated by Federal Reserve Board rate cuts. Meanwhile, he adds, “We have to scrutinize every expense — we need to pay attention.” He’s not alone. An Automotive News survey of dealers suggests that as dealership profits and new-vehicle sales slump, retailers are examining every aspect of their operations with an eye to slashing costs. More than 400 franchised U.S. dealers took part in the unscientific online survey this month. Among our findings: Nearly three-fifths of the dealers say they ordered fewer new cars and trucks in the first three months of 2008 than they did a year earlier. For dealers who primarily sell Detroit 3 domestic brands, it’s three-fourths. Two-fifths of all dealers say they have fewer employees now than they Minnesota Chevrolet and Cadillac dealer Bob Ryan: “We have to scrutinize every expense — we need to pay attention.” did a year ago. Among Detroit 3 dealers, it’s close to half. By contrast, a third of Toyota, Honda and Nissan dealers say their staffs are larger now than last year. Some dealerships have instituted hiring freezes, and others are laying off managers and workers. The U.S. Labor Department reports that dealership employment is at its lowest point since 2000 (see story, Page 1). Dealers say they also are cutting labor costs by reducing or freezing pay, consolidating jobs, outsourcing Smaller orders How does the number of new vehicles you are ordering compare with the same period last year? Unchanged 10% Higher 34% Lower 56% work, requiring employees to pay a greater share of their health care expenses and eliminating overtime. “Overtime is one of those runaway expenses not many people think about,” says Pat Hoban, a Nissan dealer in Atlanta. “That was the first thing we cut out.” Many dealers say they are reducing — or even eliminating — their advertising budgets and shifting ad spending online from print, broadcast and outdoor outlets. Others say they are replacing longtime vendors — including providers of dealership management systems, employee health insurance, and communications and data processing — with lower-cost suppliers. Brian DeCook, new- and used-car director at Mercedes-Benz of Tucson in Arizona, says his dealership is weathering the economic storm better than many other retailers. The dealership is hiring employees and spending more on TV and radio ads, while many other stores are cutting back. Even so, DeCook says he is paying more attention these days to customer relations, such as sending thank-you e-mails to walk-in visitors. “It’s a softer way of approaching them,” DeCook says. “But they respond and they come back.” For other dealers coping with a tough economy, it’s less a matter of the soft sell than of hard decisions about spending. Says dealer Hoban: “There are no gimmes in this business anymore. You’ve got to be watching your nickels and dimes.” c Ryan Beene contributed to this report. Veteran Detroit 3 dealer: ‘The future is quite bleak’ David Kushma dkushma@crain.com Scion xB price rises $100 Toyota Motor Sales U.S.A.’s Scion brand raised the base price of its 2009 xB by $100 but kept the 2009 tC at last year’s price. The 2009 Scion xB small car has a base price of $16,370 including shipping. The base model comes with a five-speed manual transmission; a four-speed automatic xB is available for a base of $17,320. The tC coupe’s price is unchanged for the 2009 model year. The tC, equipped with a five-speed manual transmission, starts at $17,620. A four-speed automatic version starts at $18,420. The xB goes on sale this month and the tC in May. Profit centers? Is your dealership profitable? Plunging new-vehicle sales. Scant profits, or even losses. Upside-down customers with sketchy credit. Ask auto dealers how 2008 has treated them so far. Among dealers who sell Detroit 3 domestic brands, nearly one-third say their dealerships are in the red. The only argument you’ll get from a lot of them is whether this is the worst business climate dealers have faced in 20 years, in 35 years — or ever. “The future is quite bleak,” says a veteran Ford dealer who answered the Automotive News survey. “Many dealers are looking for the exit.” But matters are far less dismal for Toyota, Honda and Nissan dealers. Nearly all say their dealerships remain profitable. Yes 78.2% No 21.8% “Life in Toyota-land is good,” says Dan Luneau, who owns Handy Toyota in St. Albans, Vt. Overall, roughly three-fifths of dealers — domestic and importbrand alike — say their net earnings in the first three months of 2008 were down from the same period a year earlier. And 2007 wasn’t a barn-burner. The National Automobile Dealers Association says the average dealership netted a pretax profit of 1.5 percent of sales last year. That rate tied with 2006 for the worst profit performance in a decade. Three out of five surveyed dealers — and three-fourths of Detroit 3 dealers — say they sold fewer new cars and trucks in the first quarter of 2008 than they did a year ago. To compensate, more than two-fifths of dealers say they are buying more used vehicles than they did last year. Sean Garvey, a Hyundai, Volkswagen and Kia dealer in upstate New York, says his dealerships no longer send trade-ins to auction. Instead, he says, he sells the used cars and trucks himself. The dealerships also sell their own service contracts for used vehicles, he adds. “We keep everything,” Garvey says. The survey suggests that the credit crunch generated by the subprime housing mess is taking a toll on car dealers. Two-thirds of dealers in the survey say they are having more trouble financing customers with credit problems than they did a year ago. And half of the Detroit 3 dealers surveyed said most of the new-vehicle customers they now see are “upside down,” owing more on their trade-ins than the vehicles are worth. Even luxury-brand dealers are suffering. A majority of those surveyed reported lower profits and new-vehicle sales in the first quarter. Perhaps the only bright spot: More than nine of 10 dealers agreed that getting floorplan financing is no harder now than it was last year. c Ryan Beene and Bernadine Williams contributed to this report LYA CATTEL /ISTOCKPHOTO

Table of Contents Feed for the Digital Edition of Automotive News - April 14, 2008

Dealership jobs hit 8-year low GM is the wild card in axle war Service contracts: Hard-sell tactics plague dealers, customers TV auto ads shift to online, mobile venues At seminar, marketing execs to discuss new ways to reach customers Better get to know the Nano — it's set to change the world Veteran Detroit 3 dealer: 'The future is quite bleak' Poll: Dealers scrounge for cuts Locals closer to GM strike Scion xB price rises $100 Valeo CEO: No breakup Tata Nano changes low-cost development Hyundai tailors TV, Web ads for Hispanics Study: Ads focused on vehicle qualities won on Oscar night Post-Celine, Chrysler ad guru seeks right note Chrysler's quest for quality lured Nissan exec Betts Search starts for in-vehicle alcohol detectors After S. Calif. success, Honda may fund ad groups Computer images gain ground in TV ads Web TV offers automakers new ad, sales options BMW: X6 will bring brand new buyers Diana T. Kurylko Chrysler fields 'dream' ads Nissan seeks dealerships for trucks Honda will export Alabama-built Pilots to Russia Toyota, Subaru work on 'affordable' sports car Cadillac's ad agency savors the sweet life Some stores may not sell Chrysler hybrids GM hybrids get off to a slow start in first quarter Lexus adds a personal touch to pamper owners, prospects What they're buying — and what they're not The age of fuel innovation is here Approaches to r&d vary Nano brings credibility to Indian engineering Honda must revisit online dealer sales of service pacts Chrysler got it right Mandates, markets and buyer demand For Detroit, some things never change Buick: As Chicago goes, so goes the nation Auto industry has lost a good man Accentuate the positive Ex-Porsche CEO: Cayenne spiced up sales Green programs shape battle for engineering grads Tata rewards suppliers with ties to India Bill aims to set minimum sound levels for vehicles Industry lobbyists step up emissions fight Seeking wider market, Nissan equips sports car for snow New chief of SAE has D.C. skills China and GM's answer to Nano — sort of $2,500 car is Ratan Tata's personal quest NADA offers training in risky credit Donna Harris Deal's goal: Widen appeal of dent-repair coverage Title committee created Vehicle loan delinquencies rise from 2007 Suppliers to the 2009 Tata Nano Odd China combo: Fuel sippers, SUVs Pontiac Vibe: A sporty hauler with Toyota touches Dealers J.D. Power III named tracking company partner Toyota will buy back rusted Tacomas 100,000 Flex sales a year? Farley: 'Absolutely' Ford wants word-of-mouth campaign Small suppliers feel the pain of axle strike Plastech tries to sell 2 units TRW plant will build Ford gears Toyota plans 2nd India plant Dodge launch goes digital Toyota, GM recall 660,000 vehicles for window flaws Lear announces white-collar layoffs March output drops 23.6% New Ford ads tout quality improvements Tata dealers must be handy with a wrench Can the Greens slow down the autobahn? Racy scandal for race exec Echoes from the grave: Olds still has cachet The Final Say

Automotive News - April 14, 2008

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