Automotive News - October 13, 2008 - (Page 59) OCTOBER 13, 2008 • 59 Toyota expands tech center YORK TOWNSHIP, Mich. — Toyota Motor Corp. last week opened its second campus for the Toyota Technical Center. The $187 million complex here expands the center where employees engineer Toyota’s U.S. vehicles. The new complex includes a fourstory engineering building and Toyota’s first North American crash-test center. The project frees space at the original Ann Arbor, Mich., campus for a research institute focusing on energy, the environment, safety and mobility. REPO A record 1.9 million defaults expected continued from Page 1 The repo man cometh dealers who could have trouble getting customers financed if they sell a large percentage of vehicles that are later repossessed. heat from lenders, says Dave Robertson, executive director the Association of Finance & Insurance Professionals. “It stands to reason that if a lender sees a large number of cars being repossessed, it will be more circumspect in evaluating the current credit applications submitted by that dealership,” Robertson says. ‘I’m hurting’ Curiously, some repo men say they are losing business. They claim lenders are cutting consumers’ payments on delinquent loans to avoid acquiring repossessed cars and trucks that would resell at a loss — if at all. “I’m not getting rich,” says Millard Land, who runs a repossession business in Houston. “As a matter of fact, I’m hurting. Clients are getting out of the financing business, and they are refusing to repossess cars because they are unwilling to take the loss.” Lenders contacted by Automotive News declined to discuss their delinquency policies. Dealers often are reluctant to add repossessed cars and trucks to their used-vehicle inventories, fearing their owners may have abused the vehicles before walking away from them. “Most of the time, the vehicle is pretty used up because they know they are going to let it go back,” says Kent Stevens, a Chevrolet dealer in La Center, Ky. But Wes Lutz, a Dodge dealer in Jackson, Mich., says plenty of consumers are willing to take a chance on a repossessed vehicle. Such buyers, he says, seek to pay $5,000 to $7,000 for basic transportation. “There are guys who just need transportation and want an average car,” Lutz says. “They don’t care about mileage. They care about price.” Both Manheim and ADESA say they are pinched for space to store large numbers of repossessed vehicles before they are sold at auction. “We don’t have to use outside space to nearly the degree we did at the beginning of the year,” says ADESA’s Kontos. “But inventories are still at elevated levels.” c Repos soar Through September, repossessions of new and used vehicles rose more than 15 percent from the year-ago period, estimates Tom Kontos, executive vice president of customer strategies at ADESA Inc., a vehicle auction company. That increase in “repos” follows an 8 percent rise from 2006 to last year. The home mortgage crisis, which led to Wall Street’s meltdown, was built on a mountain of bad loans to home buyers with shaky credit. But Tom Webb, chief economist at Manheim, says reckless lending practices are not similarly to blame for the rising rate of auto loan defaults. Instead, he cites high gasoline prices and a generally bleak economy. “We’ve gone through cycles before where (auto) lenders made some pretty bad loans,” Webb says. “This time, households have financial pressure. All of a sudden, they found they couldn’t make their monthly payments.” Patrick Altes, who repossesses vehicles in Florida, says lately he has been picking up more luxury brands, such as BMW, Lexus and Hummer. This year, repossessions of new and used vehicles are projected to reach a record 1.9 million units. 2,000 1,600 Thousands of vehicles 1.900 1.643 1.376 1.428 1.506 1.494 1.521 New plant: 200,000 Civics a year 1,200 800 400 0 '00 '01 '02 '03 1.235 1.113 Honda launches Ind. plant GREENSBURG, Ind. — The first Civic rolled off the assembly line on Thursday, Oct. 9, at Honda Motor Co.’s new plant here. Production of the sedan followed several weeks of trials. The $550 million plant is expected to build 200,000 vehicles annually and employ 2,000 workers. The plant helps boost Honda’s North American production capacity from 1.42 million units to more than 1.62 million. '04 '05 '06 '07 '08* * Projected Source: ADESA Analytical Services, CNW Marketing Research More luxury vehicles This year, newer, costlier vehicles such as luxury cars and full-sized SUVs make up a larger share of repossessed units, Kontos says. “These trends tell me that more repos appear to be coming from people with near-prime and prime credit” rather than subprime buyers, he says. Adds Ralph Fisco, national remarketing manager at Toyota Financial Services: “This economic downturn knows no particular demographic boundaries.” UAW: Detroit 3 mum on funds DETROIT — UAW President Ron Gettelfinger said last week that he hasn’t been asked by the Detroit 3 to allow additional delays in funding payments to the union’s voluntary employee beneficiary associations. He said the UAW would do nothing to risk the integrity of the funds, promised by the union chief to last at least 80 years. The funds, which are to cover future UAW retiree health care costs, were established as a key part of the UAW’s 2007 national contracts with General Motors, Ford Motor Co. and Chrysler LLC. Typically, lenders recover only about 40 to 60 percent of the loan balance when a vehicle is repossessed, Webb notes. Through the first half of the year, GMAC Financial Services reported an average loss of $10,532 per repossessed new vehicle, up from $8,715 in the first half of 2007. For used vehicles, the average loss per repossession was $8,441, up from $6,925. Says Mark Mathews, director of used-vehicle activities for General Motors: “It’s rare that you get full dol- lar for dollar back when you get a repo and sell it.” In the second quarter of 2008, Ford Credit reported an average loss of about $10,000 per repossessed vehicle, up from about $7,000 in the year-ago quarter. Ford Credit spokeswoman Meredith Libbey attributed the increase to a larger number of repossessions of expensive SUVs and pickups. When a vehicle is repossessed, lenders rather than dealers take the loss. But dealerships with a high percentage of repossessions could feel TOYOTA Carmaker’s captive boasts that it’s ready to make deals continued from Page 1 Michels said the 0 percent deal is restricted to qualifying customers. “But we have other alternatives, and we still do leasing,” he said. “If you’re having trouble, we may be able to help you.” Ads can be tailored Toyota’s 30-second “Saved by Zero” commercial promotes the 11 vehicles eligible for 0 percent. The qualifying nameplates are the Matrix, Corolla, Camry, RAV4, Highlander, FJ Cruiser, 4Runner, Sequoia, Sienna, Tacoma and Tundra. The commercials will run in all 50 states through the month. Dealers can tailor other commercials, including those for radio, to tout the strength of Toyota Financial and offer incentives to help customers qualify for loans. Jesse Toprak, executive director for industry analysis at Edmunds.com, said the 0 percent program may be working. Through Thursday, Oct. 9, he said industrywide showroom traffic this month was down 12 percent from the same period last year. But he said Toyota traffic was off only 4 percent. “But I’m still not sure the program will attract a lot of consumers,” Toprak said. “One big problem is that consumers who have good credit are being cautious. They want more stability in the marketplace.” “Saved by Zero” does not include Lexus, Scion or hybrid models. “If we get shoppers shopping one brand, then they will go to other brands,” said Michels. “At least it begins to build traffic. Traffic for one helps everyone. The one difference for us is there is no credit crunch here.”c Chrissie Thompson and Jim Henry contributed to this report Report: More iPod docks LOS ANGELES — About 58 percent of 2009 U.S. auto models will offer portable media player interfaces, particularly for iPods. That’s according to a report by iSuppli, a global technology research and advisory service company. During the 2008 model year, 39 percent of models had iPod connections. For integration with other portable devices, automakers will offer USB interface options on one-third of 2009 models, up from 16 percent in 2008. L.A. dealer. Toyota Division dealers need the help. Sales plunged 31.2 percent in September. “Traffic is bad,” said Conant. “We hope this messaging will help.” Dealers say Toyota will spend at least $250 million this month on its 0 percent financing program. tice what we preach.” Said Hitchcock: “Borst told us they’re loaning tighter, but at least they have the money.” The money comes from the parent company’s deep pockets in Japan, said Mark Oline, an analyst at Fitch Ratings. “They are extraordinarily wellcapitalized and liquid,” Oline said. “They have extremely strong ratings, and that allows them to borrow just about anywhere in the world.” But Toyota Motor Corp. hasn’t been immune to the collapsing stock market. At the end of last week, the company’s shares on the New York Stock Exchange had fallen to about $62, down a 52-week high of $117. Toyota won’t confirm or deny the $250 million figure. But spokesman Mike Michels says the scope of the program is unusual for the company. “It’s a significant commitment and investment to build showroom traffic for our dealers,” Michels says. “The only other comparable period was post9/11. It was time to take dramatic steps to restore consumer confidence.” Big difference: Advertising Toyota has offered low-interest deals before, but executives say this time things are different. “The big difference in this program is really the advertising behind it, not necessarily the incentive,” said Jim Lentz, president of Toyota Motor Sales U.S.A. Inc. He said Toyota will “let consumers know that there is credit available in this industry and to come buy a v http://www.Edmunds.com
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