Vehicle Sales Plunge Following Attacks
Sales of new and used cars and trucks plunged in the days immediately after the Sept. 11 terrorist attacks, but the pace began picking up over the weekend and many economists say sales should return to near normal levels by late this year.
The assessment, based in part on two industry surveys conducted in the last week, comes despite the current disarray in the stock market and temporary production cutbacks by most of the major auto manufacturers.
With estimates of 16.3 million to 16.8 million new passenger cars and light trucks sold, 2001 would rank as the third-best year on record for the U.S. auto industry.
Showroom activity fell immediately after the hijacking attacks in New York and at the Pentagon, as consumers across the U.S. stayed glued to their television sets and the attacks raised new fears about the state of the economy.
Sales bottomed out Friday, said analyst Art Spinella of CNW Marketing/Research in Bandon, Ore., drawing on data from dealers and insurers. Researchers at J.D. Power & Associates tallied daily sales data from more than 5,000 new-car dealerships nationwide, finding an average drop of 32% for the first six days of the crisis, compared with same-day sales the previous month. Power also found Friday to be the worst day, with sales down 42%.
“The declines are substantial, but given the gravity of the situation, I’m surprised they aren’t worse,” said J.D. Power analyst Tom Libby in Agoura Hills. The Northeast, where the attacks occurred, saw the sharpest declines, while sales were off only marginally in the West.
In car capital Southern California, there were signs of sales resilience, including a Newport Beach Mercedes-Benz dealership that sold 12 of the pricey luxury cars the day of the attacks.
The J.D. Power data showed Sunday’s sales nationally down just 12% from the same day last year. Indeed, Southern Californians interviewed that day were eager to shop and expressed few fears of an economic collapse.
“I have my own business and I’m not worried. War, even undeclared war, is good for the economy,” said John Veyette, a Beverly Hills franchiser of shared business office complexes. “We’ve had an incredible disaster, but we have strong leadership.” He said he and his wife have been considering a new $47,000 GMC Denali sport-utility vehicle and intend to buy one soon.
Others, such as 24-year-old Dan Vozenilek of Costa Mesa, were shopping because they had to.
“My old car was totaled in an accident,” he said while looking at a new Mercury Cougar sports coupe. “I don’t have any choice.”
Vozenilek intends for his purchase to be a vote of confidence: “I usually have German cars,” he said, “but I decided this time to try to buy American.”
Van Bussmann, head of global forecasting for the Power organization, said consumer worries “may drive the economy into a mild recession.” He expects light-vehicle sales to fall to about 16.3 million units this year, off from a record 17.4 million in 2000, and to fall next year to 16 million.
His forecast is one of the most pessimistic, though.
Paul Taylor, chief economist for the National Automobile Dealers Assn., said he expects new-vehicle sales of 16.5 million this year and 16.2 million next year, which would make 2002 the fourth-best year on record.
“Consumer confidence tends to move along with presidential approval ratings, and the president is getting very strong support,” Taylor said.
David Littman, senior economist and auto industry analyst for Comerica Bank in Detroit, said he expects consumer confidence to rebound fairly quickly, helped by the Federal Reserve’s interest rate cuts and auto maker incentives aimed at moving product even at the cost of profit.
Spinella, of CNW Marketing/Research, said his survey of buyers over the weekend found that “people postponed their intention to buy a car or truck; they didn’t cancel it.”
Typically, he said, customers who had been ready to buy last week were planning to hold off until late October. Spinella expects sales this year of 16.8 million units, the same number he was predicting before the attacks.
Reports from auto dealers seem to support analysts’ expectations of a gradual recovery, and some say they didn’t see any effect.
Sales at one of the world’s busiest Mercedes-Benz dealerships, Fletcher Jones Motor Cars Inc. in Newport Beach, were “surprisingly strong” all through last week, General Manager Garth Blumenthal said. “We sold 12 cars on Tuesday, and were in double digits every other day of the week; then we sold 50 over the weekend,” he said.
Oscar Suris, spokesman for AutoNation Inc., which operates 368 new-car franchises in 17 states, said sales and shopper traffic patterns have been inconsistent.
“Some of our stores have reported significant drops in sales. Others say they’ve had significant business,” he said. “As a result, we really don’t know what the long-term impact’s going to be.”
Bert Boeckmann, owner-president of Galpin Motors Inc., which operates six dealerships in the San Fernando and Santa Clarita valleys, said sales at his flagship Galpin Ford were off just 5% for the six days after the attack and have been inching back up since then. The big drop, he said, is in casual floor traffic. The number of shoppers is off almost 50% from a year ago, he said, but almost half of them are buying cars, versus fewer than 23% last year.
Elsewhere around the country, dealers sounded the same.
“Business has slowed to a trickle. We sold four or five cars Saturday, but [Monday] we haven’t had anybody in,” said Bill Radston, a salesman at Maritime Motors, a Chevrolet and Oldsmobile dealer in Norwalk, Conn.
“We’ve felt the shock of New York,” Radston said. “But it’ll come back. People always come back and buy a car; they need transportation.”
Auto makers already had adjusted production schedules downward because of a steady sales decline this year, compared with last year’s record pace. Then travel restrictions and delays at border crossings between the United States and Canada after the attacks resulted in parts shortages, causing temporary shutdowns at several North American assembly plants.
Among the Detroit-area Big Three, General Motors Corp. lost 10,000 units of production last week but says it can make that up. As of Tuesday, all its North American plants were running normally. DaimlerChrysler’s North American plants were operating on schedule, with only 3,000 units lost from a half-day closure of factories the day of the attacks.
Ford Motor Co. announced longer-term measures, saying it will slash third-quarter production by 110,000 to 120,000 units and issuing its second profit warning for the quarter.
Executives of the U.S. units of Japanese auto makers Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. said production losses from brief shutdowns of their U.S. plants last week were minor and can be made up.
