Economic gloom takes the shine off of N.Y. car show
As the last gasp on the months-long auto-show circuit, New York’s confab is traditionally a heavy dose of fun with a splash of car debuts -- a chance for the industry to display its latest concept vehicles, party in the city that never sleeps and wash it all down with a stiff drink.
This year is different.
The shadow of the worsening economy has cast a pall over the doings. It’s tempering the speeches of the few automotive execs who bothered to show up; it’s Topic A among the analysts and dealers roaming the exhibits; and it’s evident in the automakers’ subdued news conferences.
“This year’s show has a muted feel,” said Barry Toepke, a longtime auto industry public relations consultant who for years helped run the L.A. auto show. New York’s show opens to the public today and runs through March 30. “Everyone is walking around with smiles painted on. But the unavoidable undertone is what’s happening to the economy.”
U.S. car sales have slumped, down 5.4% through February compared with last year, with all but two major carmakers showing setbacks. Economic indicators tied to vehicle purchases, such as unemployment and housing starts, are grim. The prices of raw materials and gasoline are up. And on the show’s eve Tuesday, J.D. Power & Associates predicted that total 2008 U.S. new-car sales would fall to 14.95 million vehicles, more than 1 million fewer than last year and the lowest since 1994.
Cue panic.
The next morning, at the show’s keynote speech, Chrysler Chief Executive Robert Nardelli outlined his company’s plans to reduce production, rein in costs and cut models from its lineup. He talked about reduced sales in “a challenging economy,” adding that, unlike more optimistic rivals, he had no expectations for a second-half recovery. “We really faced reality,” he said.
Other Detroit automakers then rushed to defend their sales predictions, which do foresee an uptick starting in mid-summer. General Motors Corp. execs said 2008 sales should end up at where they were last year, at 16.1 million cars and light trucks, adding that the government’s economic stimulus plan -- which will send checks for a few hundred dollars to taxpayers starting in May -- would boost sales.
Ford Motor Co. said it expected U.S. sales to total 15.7 million, a number that six months ago would have sounded dire but now sounds downright sunny. (Toyota Motor Corp., the world’s second-largest carmaker, was mum about updating its numbers, despite suffering sales declines this year.)
“I don’t see anything that’s going to turn this around,” said Bob Schnorbus, chief economist at J.D. Power. He says the company has three sales predictions, including one for an all-out recession that would drop sales to 14.5 million. “We all hope we’re wrong, but it’s not looking pretty.”
Carmakers have been steadily trimming production in preparation for a drawn-out slump. They’ve reduced their workforces and cut shifts at plants. Last week, Chrysler announced a mandatory two-week company vacation in July to cut costs. The same day, Toyota said it would cut the number of Tundra pickups and Sequoia SUVs it would produce.
Meanwhile, automakers are trotting out more cash-back rebates and reducing interest rates to push the cars already on lots. For the first several months of the year, they flirted with an average of $2,500 in incentives per vehicle, $100 less than the record.
The economy isn’t just on the minds of the big boys. On Tuesday night, a few dozen people gathered in a Park Avenue showroom to see the latest Ferrari and Maserati models.
Over canapes and cocktails, Maserati’s commercial director, Raffaele Fusilli, kept a stiff upper lip, predicting sales increases this year but admitting that economic challenges could turn against any carmaker.
“The situation is not good and it’s not clear,” Fusilli said, mentioning the collapse of investment bank Bear Stearns a few days earlier. “We haven’t seen a sign of recession in our sales, but everyone is concerned.”
A day later, Tom Purves, chairman and CEO of BMW North America, made a direct appeal to reporters to write positive news. “Anyone who tells you the market isn’t tough, that’s surely just not true,” he said. “Americans are on the tipping point now, and we need all the help we can get.”
On the floor of the Javits Center, where the auto show is held, buzz was notably absent. Few important cars were unveiled, and many carmakers chose to avoid the glitz. Ford, for example, eschewed a news conference, instead simply placing cars such as a limited-edition Mustang with a pink racing stripe (in support of a breast-cancer charity) and a wrecked Taurus (designed to illustrate safety) in its stand, with no ceremony.
Mark Fields, Ford’s executive vice president, said: “It’s just a little more casual. This is an understated show.”
Erich Merkle, auto analyst at IRN Inc., said “the show is usually a lot better,” but with sales foundering, even huge carmakers are apt to cut corners.
Of course, there were a few attempts at star turns. South Korea’s Hyundai Motor Co. introduced its Genesis sports coupe and hired a pair of female drivers to accelerate and drift or spin-out the cars while a band, Rockstar Joe, played.
Other smaller Asian automakers tried to take advantage of quietude to make a splash. Suzuki, Mitsubishi and Kia drew unusually large crowds to their introductions (although, it should be noted, Suzuki promised a free lunch).
“We threw a party and held a press conference,” said Alex Fedorek, director of public relations for Kia. Although Kia’s sales are off 6.2% through February, he says the company is keeping its chin up because in tough times, less expensive vehicles may be more appealing to consumers. “People are dooming and glooming, but we remain confident.”
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