GEORGE C. PETERSON : President, AutoPacific Group Inc.
To get a new car to the customer, it takes much more than designing it, building it and getting it on the showroom floor. Months and months of highly secret market research went into the 1993 vehicles. Manufacturers look to consulting firms such as AutoPacific Group in Santa Ana to rate their latest models and make sales forecasts. With a recession, spotting a lemon is ever-important. AutoPacific President George C. Peterson talked to Times correspondent Ted Johnson about the prospects for auto makers for the upcoming model year.
Is Detroit making a mistake by raising prices just after the Japanese did?
In order to improve their profitability, the Japanese raised their prices earlier this year. Normally what happens in that situation is the domestics follow immediately so they can raise more profits as well. But when they follow the Japanese in terms of price, they don’t gain in market share. They just stay even. This time what they did is they didn’t raise their prices as much as the Japanese did. So now what you are finding is the Japanese (cars) are becoming premium price products compared to equivalent domestic products. This is what is creating an advantage for the domestics.
Why has the average price of a car gone from $7,000 in 1980 to $17,000 now, and the inflation rate has not risen at the same pace?
It has to do with mandatory safety requirements, which include passive belts and air bags, emissions requirements. Don’t get me wrong, all of these things are good for the consumer. But all the consumers have to pay for it. A lot of the times the consumer is blaming the auto industry for this price increase, when a lot of it can be assigned to government regulations. I believe the statistics tell you that once you take away the changes required for regulatory achievement, actually the prices of cars have gone up at the rate of inflation.
Some dealers have started “no-dicker sticker” policies, where there is no negotiating on the price. Will it catch on?
It’s an outstanding idea. It’s the way that we should have been selling cars all along. The consumers hate the car sales process, absolutely hate it. Basically the no-dicker sticker allows the dealer and the salesperson to take a much more honest approach with the customer. I think what will happen over time is it will upgrade the image of the dealerships in the United States. It will make the sales processes of those dealerships much more efficient.
How do the dealerships set the price?
A high percentage of dealers put additional (amounts) on their stickers. So you’ll go in and, let’s say the price on a car is $20,000 and the sticker price will say $23,000. If you have a hot car, the dealer will hold the $23,000 price on that car. If the car is a negotiable car, a car that is not as hot and the dealer knows it, what the dealer will do is take that $3,000 and knock it off immediately. He will say, “Look, we gave you a $3,000 discount,” which is actually off his own price.
What segments are growing fast?
Sport utility and minivans are still going to be very strong. Full-sized trucks are still going to be strong. Luxury cars will come back again, and there’s going to be more choice. Certain basic cars will be growing, such as small cars and mid-sized family cars. We’re seeing a deterioration in the small sporty cars, things that are more discretionary.
In the coming year, what generates the most excitement?
Chrysler’s LH cars. If it’s a good car, the LH is a product that should really turn Chrysler around. It’s an upper-middle-end car, in the category of a Ford Taurus, and above the Honda Accord or Toyota Camry. I’ve driven the (LH models) several times. They are outstanding cars to drive. But all those are pre-production prototypes, they’ve been finessed within an inch of their lives. The thing is, can Chrysler build good cars at high volume at their Canadian assembly plant? The jury’s still out on that one.
What about the “buy American” movement? Will that have an impact?
To be honest with you, a lot of that is fueled by the media. The consumers listen to it, and for a certain period of time the consumers were not buying Japanese. They didn’t want to. But the Japanese aren’t stupid people. What they did is they made dramatic changes. They reduced their voluntary restraint agreement amounts. Really it was just a token, but it was the idea anyway. They also sacrificed Daihatsu. They said “You’re the sacrificial lamb, you’re going out of business.” And Isuzu is likely going to go out of the car business at the end of the 1993 model year. They are mainly in the truck business. The other thing is if you study very closely this new full-sized Toyota pickup truck, you will find for political reasons, it’s not as fully competitive as it should be. They won’t tell you that, they won’t admit it, but anybody can figure it out. It does not have a V8 engine, which is required in that class of vehicle. It doesn’t have an extended cab available. I really think that Toyota was concerned about making a real run at American full-sized pickups and said, “We actually have to back off a little bit. We don’t want to be too competitive.”
What is the state of auto makers in Orange County?
All of the Orange County companies are kind of in a lull for the 1993 model year. Mazda has just come off a year where they have completely turned their product line inside out. Just about every one of their cars over the last 18 months is brand new, and it’s sort of a product development period that no company has ever had that is so aggressive. Similarly with Mitsubishi. Mitsubishi will have a station wagon version of the Diamante, and also they will be replacing the Gallant mid-next year. That will be a car that competes with the Accord and the Camry. The same thing with Hyundai. Hyundai doesn’t have anything (new) until 1994. And Suzuki supposedly will have a new small car out for 1994.
On dealer efforts to eliminate incentives.
“Once the consumer gets addicted to rebates and discounts and cash backs, it’s tough to get them off of it.”
On consumer buying habits.
“Generally you find today that consumers get pretty darn smart before they buy a new car. They are doing much more reading, more cross-shopping. They are more sophisticated.”
On GM’s Saturn.
“Saturn is an outstanding concept, it’s a good car, but really why people are buying Saturns is it’s an American made alternative to a Japanese car. Basically, what you see is what you get.”
On the “no-dicker sticker”
“It makes you as an automotive customer confident that the person who buys the car after you won’t pay less money. You don’t have to be concerned that you are a bad negotiator and somebody else could get a better price.”
