Automotive News - February 11, 2008 - (Page 30) 30 • FEBRUARY 11, 2008 Survey: Dealers divided on outlook for ’08 Roughly equal numbers expect year to be better, worse, the same as ’07 David Kushma dkushma@crain.com Dealers speak More than 500 dealers took part last month in an Automotive News unscientific online survey. Here are responses to four questions. 1. Predicting profits: How do you expect your net profits in 2008 to compare with last year’s profits? Auto dealers are of three minds about their prospects for 2008, in roughly equal proportion. About a third of U.S. franchised dealers surveyed by Automotive News say they expect higher net profits and newvehicle sales at their largest-volume stores this year compared with 2007. Another third say they expect lower unit sales and profits — or even losses — in 2008. The remaining third foresee little change from last year. Recession fears appear to be dampening dealers’ forecasts. In a similar survey last year, about half of dealers said they expected annual increases in net profits and new-vehicle sales. More than 500 dealers took part in last month’s unscientific online survey. It was conducted largely before the Federal Reserve Board twice cut interest rates — moves that were expected to help boost car and truck sales. About the same 31.0% Lower 31.5% Higher 37.5% 2. Inventory: Do you expect to order more small cars and small trucks in 2008 than last year? Yes 64.7% No 35.3% Divergent forecasts As in previous surveys, attitudes diverge between Detroit 3 dealers and those who sell import brands, especially the Japan 3. This year, Detroit 3 dealers are slightly more likely than those who sell Toyota, Honda and Nissan brands — including their luxury marques — to anticipate higher net profits. That’s in sharp contrast to 2007, when almost two-thirds of Toyota and Nissan dealers said they expected higher profits. An almost equal share of Ford and Lincoln-Mercury dealers said they expected lower or flat profits last year. But Mark Beford, a Ford dealer in South Point, Ohio, says he is excited about the brand’s vehicle lineup this year. “The quality of the product puts us in a position to overcome the perception that people had in the past,” Beford told Automotive News. “We’re feeding off the emotional engagement of people who are buying this new product.” Through November 2007, the average dealership’s pretax profit last year was 1.7 percent of total sales, the National Automobile Dealers Association says. For all of 2006, the figure was 1.5 percent. But while two out of five Toyota, Honda and Nissan dealers say they expect to sell more new vehicles in 2008 than they did last year, barely one-fourth of Detroit 3 dealers expect to. Tom Machen, a Chrysler, Dodge, Jeep and Ford dealer in Forrest City, Ark., says he expects his new-vehicle sales to drop 15 to 25 percent this year, from about 125 units last year. “The uncertainty in all the financial markets and the credit situation of the customers — somebody’s got to pay the piper,” he says. 3. Factory relations: How would you characterize your relations with the factory that produces your highest-volume brand? 50% 40% 30% 20% 10% 0 Great Good Fair 4. Advertising aid: Is national advertising for your highestvolume brand effective in bringing traffic to your showroom? Yes 44.8% Two-thirds of all dealers say they are getting the vehicles they want from their automakers, according to the survey. Above, 2008 Buick Enclaves are assembled at General Motors’ Delta Township plant near Lansing, Mich. ences among brands. Almost half of Japan 3 dealers say they enjoy great factory relations. Alex Johnson, general manager of Ted Vey Nissan in Bennington, Vt., says Nissan representatives in his sales district “bend over backwards to work with us. If we have a question, we’re not talked down to or sloughed off.” By contrast, two out of five Detroit 3 dealers say their factory relations are just fair or strained. Robert Moses, a Lincoln-Mercury dealer in Norristown, Pa., says uncertainty over the future of the Mercury brand is alienating dealers from factory executives. “They’re not telling you what’s happening with Mercury,” Moses says. “They keep saying it’s going to stay, but they take away advertising. You don’t know what to plan for.” Even as General Motors, Ford and Chrysler are accelerating efforts to reduce their U.S. retail networks, threefourths of Detroit 3 dealers say overdealering remains a problem. That’s the same share as last year. Frederick DeRise, a Chevrolet and Volkswagen dealer in Kingston, N.Y., says GM’s biggest challenge is the “number of dealers they have.” “It’s a challenge to run a singlepoint Chevrolet store because of the number of dealers,” DeRise says. “It affects your facility and it affects your people. If you’re selling less cars, they’re making less money.” By contrast, half of Japan 3 dealers say the number of regional dealerships that sell their brands is just right. no difference between Detroit 3 and Japan 3 dealers on this issue. A new federal law requires automakers to boost the fuel efficiency of their fleets to 35 mpg by 2020 — a 40 percent increase. Most of the dealers surveyed, and three out of five Japan 3 dealers, say good fuel economy is very important to their customers. Marlin Knight is COO of Ron Bouchard Auto Stores in Fitchburg, Mass., which sells six domestic and import brands. He says of his customers: “When gas gets up to $3 a gallon, we see a big difference in what they are looking for.” Dealer complaints about automakers’ inventory policies appear to be receding. Nearly two-thirds of all dealers — and three-fourths of Japan 3 dealers — say the factory is not pressuring them to take cars and trucks they don’t want. Last year, almost half of dealers — and nearly all Chrysler, Dodge and Jeep dealers — said they felt such pressure. At the same time, two-thirds of all No 55.2% dealers say they are getting the vehicles they want from the factory. Japan 3 dealers express somewhat more favorable attitudes on the issue than their Detroit 3 counterparts, but the gap is not large. Ad adversity Automakers’ national advertising remains a chronic source of complaints among GM, Ford and Chrysler dealers. But the gripes seem to be subsiding a bit. Nearly two-thirds of Detroit 3 dealers in this year’s survey say national ads for their highest-volume brands are ineffective at bringing traffic to their showrooms. Even so, that’s a slight improvement from last year, when almost three-fourths of dealers expressed similar sentiments. Again, Japan 3 dealers look at the other side of the coin. Two-thirds of Toyota, Honda and Nissan dealers say factory ads do drive traffic effectively to their showrooms.c Ryan Beene contributed to this report Domestic discord Overall, two-thirds of dealers characterize their factory relations as great or at least good — a slightly higher share than last year. Nearly a third say those relations improved over the past year. But that finding masks major differ- Getting smaller As both domestic and importbrand automakers tout their commitment to fuel economy, two-thirds of all dealers say they expect to order more small cars and small trucks in 2008 than they did last year. There is Still too many dealers Three of five dealers surveyed say there are too many dealerships in their region that sell their highestvolume brand. Strained
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