Dealers are concerned. A possible war, a shaky economy and the effect of 0% financing have them looking carefully at their businesses.
Yet, dealers remain optimistic and reveal an uncanny ability to adapt.
Here's what they had to say, in their own words, for our annual “Dealers Speak” feature in which we ask dealers what's most on their minds at the start of the new year:
Gilbert Chavez, General Manager, Burt Automotive Group, Englewood, CO
“I'm optimistic about this year. I've got a lot of faith in the president and his new economic team. But I think it's going to be a weird year.
“Analysts here in Denver are saying the local market could grow 6%. We have a lot of new jobs being created and new people moving in.
“However, 0% has taken a lot of sales out of 2003 so we'll have to wait and see what the impact will be.
“I'm not too concerned about the war, though. There might be some short-term effect, I guess. But long term, I think it could help us. War has always been good for the economy.
“Last year, unfortunately, was a hard, mean, difficult and nasty year for us.
“Keeping the guys motivated was tough. We had to get rid of some guys and hire some others.
“We are testing some of our processes now, looking at how our Internet staff sells finance and insurance products comparing the methods with those used by the showroom floor sales staff.”
“Going to be a bleak 1st quarter”
Eric Jenkins, Owner, Leesville Ford Lincoln Mercury Toyota, Leesville, LA
“I'm faced with a different situation here with Leesville being a military town. Already, 4,600 troops have been shipped over seas from Fort Polk [as of December] which is one of the main army training bases in the country.
“Once we start dropping the bombs, it's going to be tough. As a result, I'm expecting a very bleak first quarter.
“Also, I'm a small dealer in a small town (pop. 6,200) and I need cars - primarily Ford cars. Taurus hasn't been a big deal for me because I sell a hell of a lot more Camrys than Tauruses. Toyota also did a great job on the Celica and that helped us a lot.
“Our Ford car business was actually up, though last year. The ZX2 Escort sold great for us in 2002. But we lose that next summer. And, our Ford truck business was down in 2002.
“Ford's product pipeline, though, is pumped this year with the Mustang, the Freestyle and the Five Hundred and we're excited about that. But we need an on time, proper launch of the F-Series in June. Our future hinges on a flawless launch.
“The O% financing hasn't really helped me too much because there are a lot of credit problems here. But the partnership Ford has with Ford Credit with all of the incentives, though, has been great for us.
I just wished Ford would merchandise 0% financing better nationally and stop leaving it to the regional and dealer advertising groups to advertise. We just can't convey that message on a professional level.
“I am glad to see Ford spending money to advertise the Taurus, finally. And that New Super Duty campaign is awesome.
“I believe the industry will be strong overall, but I'm not sure I'll benefit from it. Our interest rates on floorplan have dropped, however, and that has been a godsend. But, I need Al [Greenspan] to go into another meeting and cut the rate another half percent.
“Ford dealers have a lot to prepare for in the next 27 months before Blue Oval goes away. We have a hell of a challenge.
“But we have a lot to be proud of and a lot to look forward to. I'm pretty damn pleased to be a Ford dealer at this time. With all of the talk about the 100th anniversary, that will only help us this year.”
“Focus on what I can control”
Mark Rush, General Manager, Ron Rush Lincoln Mercury, Columbus, OH
“This year will be one of getting back to the basics. The focus is going to be on our core business.
It's like a football game — it's the blocking and tackling that wins games. So we're going to be very sensitive to our showroom activity and will concentrate on selling to those people.
“You have to pick certain vehicles that are your bread and butter and channel your sales effort toward those vehicles. We have the Town Car, the Grand Marquis.
“And the Aviator fills a hole in the lineup between Mountaineer and Navigator. There is a nice pricing differentiation between the three. It's enough of a spread to be logical.
“There is so much I can't control so I've got to focus on what I can control. The possible war? How do I plan for that? I don't think there is anything I can do to help Bush with that. His job is to win the war, mine is to sell cars.
“But it did strike home for me the other day when I had a customer who has two teenage sons remark to me that he is concerned about the draft being reinstated.
“I'm having a phenomenal year with customer satisfaction.
“The Lincoln Premier program forces us to focus on 100% of our customers at 100% of the contact points 100% of the time.
“Our 12-month running numbers shows a 16% increase in the number of service customers who would recommend our dealership to someone else.
“I'm very ecouraged with Lincoln Mercury's move back to Detroit this year. That is where the heart of engineering is and being there will only help us.
“Darryl Hazel (Lincoln Mercury president) knows what dealers do and he also knows what he has to do.
“If you think about it — Jim O'Connor running North America for Ford; Lincoln Mercury moving back to Dearborn; the hiring of Hazel; and getting Lincoln Mercury out of Premier Auto Group — we know now where we fit.
“These things haven't actually had time to jell yet.”
Bill McSkimming, Owner, RiverFront Chrysler Jeep, Aurora, IL
“We are looking for business to come back. Personally, I think the economy will be okay and I'm optimistic that 2003 will be pretty good.
“DaimlerChrysler has some great product coming in the next couple of years. We no longer have quality issues.
“And the certified used-car program has been very good for us. Chrysler started that last year, a little later than the others but they've done it right.
“This year, we're adding 6,000 sq. ft. to our parts department. We need to be able to buy in volume to get the discounts.
“The challenges for this year are in customer satisfaction — but that is difficult for everybody. The dealers that don't focus on it will have trouble in the future.”
“Everything is so inconsistent”
Ralph Martinez, President, Town & Country Dealership Group, Milwaukie, OR
“I can predict one thing about 2003 — It's going to be unpredictable! I think the world is wasting its time worrying about Iraq. The last time we went to war with them — when they had the weapons and manpower — we still had an easy time of it. And I expect it will be the same this time. We still have to live our lives here.
“Zero percent has gone on forever and was the demise of the used-car business for us. But we made our adjustments, especially to our stocking practices. It forced us to live by our 60-day stocking rule.
“The prices on used vehicles are ridiculously cheap now. We certainly aren't making the spread we used to. But with the right stuff, the right product — we're still doing well.
“Overall, the market is soft in spots. If the economy continues as is, it will get softer. Also, we don't yet know the ramifications of the robust sales of the last 18 months.
Inventory is still pretty fresh. It will probably be late ‘03 or ‘04 before we start seeing some of those customers coming back into the stores.
“I am concerned about the direction of the manufacturers. I would like to see a commitment for true market penetration with a consistent and strong game plan. Let the dealers know what you're going to do so we can plan.
“Our margins are suffering because everything is so inconsistent. We can deal with less volume.”
“Year of Many questions”
Jack Doherty, Vice President, Dimmitt Cadillac, Clearwater, FL
“This will be a tough year with many questions. If we go to war — what happens then?
“And we certainly pre-sold the market with the aggressive incentives. What happens when they go away?
“I believe our sales will be higher than last year, however. The product coming from Cadillac will make for a lucrative selling season this year. We have the XLR and the SRX — the ultimate soccer mom SUV.
“The luxury market is getting increasingly younger. We're selling Escalades and CTS to younger folks.
“They haven't been affected as adversely by the stock market and what's going on with the government.”
Don Hill, Owner, Don Hill Enterprises, Kingsport, TN
“I've seen the market soften the last few weeks of the year. And I think we'll be down in the early part of 2003.
“To compensate, I'm encouraging our folks to get in touch with customers and try to stir up some activity. I don't think advertising alone will get people into the stores. We have to be aggressive about it.
“The luxury market, fortunately, is real strong for us.
“Pontiac was down last year — about 10%. But, I do see signs that it is coming back.
“We do need more product and need to get those cars changed out more often, though.”
“Can't have a banner year every year”
Mike Riehl, President, Mike Riehl's Roseville Chrysler Jeep, Roseville, MI
“Hopefully, the economy and the stock market will stop sliding. But fortunately Chrysler is headed in the right direction.
“Our quality is very good now and we had a record month in December selling Jeeps.
“The Pacifica is going to take some buyers from all of the segments. I'm real excited about it. Chrysler is chomping at the bit to get the vehicle out on time if not sooner. The only problem is getting enough of them will be challenging.
“Unfortunately, some of the product is older than we would like but that is changing.
“In the next couple of years, we do have some great product coming into the showrooms.
“This year will be a challenging year — but we can't have a banner year every year. We're just going to have to focus more.
“DaimlerChrysler got pushed into the recession sooner — hopefully that means we'll be out sooner. First in- First out — that could be a good thing.”
“Anything other than a blood-letting venture?”
Ernest Boch, President, Boch Automotive Enterprises, Norwood, MA
“This year will be the most competitive year we've seen in a long time. There are so many automotive players from all over the world and that's what makes it so competitive out there. Right now, I'm having to sell some Toyotas for $2,000 under sticker.
“I'm the Subaru distributor for the Northeast and I can tell you, there are four or five vehicles directly competing with the Outback.
“The OEMs have been so aggressive putting the incentives on, how can it be anything other than a blood-letting venture?
“But if they take them off, sales would go nowhere. I wonder, though, if the incentives are losing their effectiveness.
“In August, sales were at their peak. In fact, we sold 1,000 Toyota vehicles in August. Since then, sales have gradually come down, though.
“If that war comes, everyone will be at home sitting and watching television.
“I guess all this means dealers have to make sure our houses are in order. We've been employing the latest technology, doing things we were never able to do before. We've been getting less traffic in the stores, but we're closing more leads.
“We're using the technology to track everyone who comes into the stores and onto our web site. And then we concentrate on closing those leads.
“But the trick still is to get more traffic into the store so we can sell to them.”
“Lean & mean”
Lillie Biagas, Owner, Fairway Automotive Group, Jenkintown, PA
“We do have the threat of war looming over us and consumer confidence is not there right now. So, I think 2003 will be the year to be lean and mean.
“But we are approaching 2003 optimistically. We are going to be very positive. We're telling our sales team that there are opportunities out there.
“We are watching our expenses very carefully. Our first year in business was a big learning experience for me. We tried many things regarding customer relationship management. As a result, we learned what to do and what not to do. We'll obviously employ the things that work.
“Hopefully, we'll still have the support of the manufacturers and that they continue to come out with aggressive incentives.
“Also, Cadillac is poised to come out with some great product. And so is Buick. General Motors is doing several things to create excitement and bring customers into the showroom.”
“Can't continue 0% forever”
Bert Allen, Owner, Bert Allen Pontiac GMC Mercedes Benz, Gulfport, MS
“This year very much depends on the war and political situation. We'll have to wait and see how they affect the economy. It colud be tough.
“Also, the manufacturers cannot continue with 0% financing forever.
“From what I can see, we have stolen a lot of business from this coming year. Obviously, we need to have changes on how cars are retailed.
“But I believe the used-car business and the truck business, at least for us, will continue to be strong.
“The SouthEast and Southwest regions are predicted to be at the same levels this year.
“So we're expecting 2003 to be very similar to ‘02 volume-wise for our store.”
Eleanor Felbaum, President, Fairfield Pontiac GMC, Sacramento, CA
“This year definitely will be strong. We've had stronger previous years that have spoiled us. We're at a point where we have higher than normal expectations. We just have to adjust our expectations.
“Of course, the economy is my number one concern. After that, I would have to say it's the frivolous lawsuits against dealers here in California.
“Several dealers recently held a meeting with a group that was set up to help protect us. But i was very disappointed in the meeting.
“All it was, basically, was to tell us to contribute more money to the candidates we think we would help us.”
“There were two recent class action lawsuits against dealers here for advertising issues and I was one of the several to be sued. Fortunately, I was only part of one, not both.
“The incentives will continue in 2003 and that will help sales. The manufacturer has to continue them because the consumer has gotten so used to them.
“I do believe the war will happen this year. But I think the only effect will be to scare the consumer for the first couple of months. It won't impact us much. It will be life as normal.”