Maybe the Glass is Too Big If expectations aren't too high, '01 might be a decent year
Some people think the glass is half full, some think it's half empty. I think the glass is too big." It's an old George Carlin joke, but it kept running through my mind at the Society of Auto Analysts meeting early last month at the North American International Auto Show.
The top economists for General Motors Corp., Ford Motor Co. and the Chrysler unit of DaimlerChrysler AG each trotted out their forecast for the coming year, trying to put the best face on a bad situation. Publicly, at least, the glass still is half full for them. No one was about to admit that we might be slipping into a recession, although there are some very troubling signs on the horizon, especially for the former U.S. Big Three.
Besides a precipitous drop in vehicle sales in December, unemployment is starting to rise, consumer debt levels (mostly in the form of credit cards) are at or near record levels and the real wealth of many consumers has dropped dramatically along with the stock market.
Furthermore, G. Mustafa Mohatarem, chief economist at GM, says there are worries on the international front as well: The economies of Japan and Korea are faltering again, instead of coming back like most anticipated. Europe, plagued by sky-high fuel prices and a weak Euro, also is in a funk.
Just looking at the U.S. economy, Wynn Van Bussman, corporate economist for Daimler-Chrysler, admitted that "It's hard not to think recession with the rapidity by which sales dropped in December."
But he added that numerous positive factors - such as inflation being under control - made recession unlikely. He expects the U.S. economy to be back on track by the end of the year. Also, overall productivity still looks good, interest rates are low and likely headed downward. Unemployment - though rising - is still low. And while Japan and Korea are tanking, Canada and Mexico are looking good, and China and India are growing strongly.
While there was much talk about a "somber" mood at the show, you couldn't find it in the booths of most foreign nameplates. Almost every Asian and European automaker predicted sales would be up this year by 2%, 3.5% or more. Some, such as Audi of America Inc., predict double-digit growth this year. Honda's Acura Div. is predicting record sales. Clearly they figure if there's going to be a recession in the U.S., it's coming out of the hides of GM, Ford and the Chrysler Group.
But Diane C. Swonk, the SAA panel moderator and chief economist at Bank One in Chicago, said Wall Street, which had a much worse 2000 than Detroit did, is setting an unrealistically gloomy tone for the U.S. outlook.
Even after all the negative factors are figured in, the U.S. still could easily see the fourth best sales year in history, she says.
The fourth best. That's not so bad. Maybe George Carlin is right. Maybe our expectations are just too high and the glass isn't half full. It's just too big.
WAW Wins Two Wheel Awards Ward's AutoWorld magazine was awarded two International Wheel Awards in January for feature and editorial writing. The Wheel Awards honor the best in coverage of the automotive industry and was established by the 35-year-old Detroit Press Club Foundation to reward excellence in journalism and recognize Detroit's significance in the auto industry.
Asia Editor Katherine Zachary and yours truly won third place in the Special Interest Magazine category for "By Design," a Feb. 2000 cover story detailing how the world's automakers are radically changing the designs of their future vehicles to appeal to tomorrow's consumers.
I also won a third-place award in the editorial/column category for "Inside the GM Matrix" a satirical Aug. '00 editorial on the future prospects of General Motors Corp. It was the only trade magazine editorial to receive a plaque in the competition.
A rebuttal, so to speak In a September '99 editorial I argued that GM's Cadillac Div. was doomed to become a niche player in the U.S. I also cruelly remarked that the 2000 DeVille was "butt ugly" and stated "That puppy isn't going anywhere without BIG incentives." Well, GM CEO Rick Wagoner gleefully pointed out to me several months ago during our annual State of the Industry interview that my prediction was wrong. According to Mr. Wagoner (and our own Ward's data) sales of the DeVille rose 16.5% in 2000 over the prior year without the use of ANY national incentives, and it also appears to be acquiring reverse chic status in Hollywood. Chris Preuss, Cadillac's director of communications, says Charlie Sheen, Nicolas Cage and Ben Affleck all recently bought or leased new DeVilles (without benefit of any special deals from Cadillac, he insists) along with rock star Lenny Kravitz and Jason Krause, the drummer for Kid Rock, and basketball star Shaquille O'Neal. Shaq no doubt likes all the leg room the DeVille offers; but why would Hollywood talent agent Nick Stevens want one? Hmmmm ... maybe because it has lots of head room; probably a necessity when carting around the likes of Madonna and Jim Carrie. I could point out that nearly all redesigned vehicles do better than their predecessors for at least a year or two, and that 1999 was one of Cadillac's worst sales years, making it easy to show improvement the following year. But that still wouldn't completely explain DeVille's success. Beauty may be in the eye of the beholder, but incentives are not.