Slowdown takes the shine off auto shows
Facing their worst sales in decades, carmakers are cutting spending on auto shows, the industry’s traditional customer-courtship event.
General Motors Corp. has scrapped plans to debut its Buick LaCrosse and the Cadillac CTS Coupe at the Los Angeles Auto Show next week, and said Tuesday that it was canceling its only news conference planned for the event. Chrysler said it would make local dealers pay for the company’s exhibition stand at the show and would reveal no new products.
Four other car companies -- Ferrari, Rolls-Royce, Land Rover and Suzuki Motor Corp. -- are withdrawing from the nation’s premier auto show, held in Detroit in January.
Those and other auto show cutbacks come as GM, Chrysler and Ford Motor Co. lobby for billions of dollars in federal aid. GM and Ford lost a combined $30 billion in the first nine months of the year, and GM said last week that it could run out of cash in the first half of 2009. Privately held Chrysler does not release financial results but is widely thought to be in dire financial straits.
Through October, overall U.S. auto sales are down nearly 15% compared with last year, and just one major automaker, Subaru, has sold more cars in the U.S. this year than last.
In response, Detroit’s automakers have cut production and shed thousands of jobs; GM announced 5,500 layoffs last week. And all auto companies, including leading import brands, say they have been reducing other spending.
That, increasingly, is affecting auto shows. Nationwide, four shows -- Los Angeles, Detroit, Chicago and New York -- are the largest and most important. Drawing battalions of reporters to their new models and concept cars, they build buzz and then throw open their doors to hundreds of thousands of potential buyers.
“Clearly, we’re affected,” said Andy Fuzesi, general manager and co-owner of the L.A. Auto Show, which has nearly 20% fewer exhibitors at this year’s show compared with last year, when nearly 100 companies paid to show their wares to more than 1 million visitors at the Los Angeles Convention Center. “Everybody is clearly reassessing where they spend their money.”
GM’s last-minute pullout left Fuzesi with a hole in his schedule and cast a pall on the show. Bob Lutz, GM’s legendary vice chairman, was supposed to lead the news conference but will stay home in suburban Detroit, leaving show-goers with only a hybrid concept car that already debuted in Paris. Chrysler’s near-invisible presence at the show guarantees that two of the four biggest exhibitors will make little noise. That, Fuzesi said, could discourage people from paying $10 for tickets to the show when it opens Nov. 21.
Of course, not all automakers are pulling back. Ford is introducing six vehicles at the L.A. show, including two hybrids, and is throwing a huge party for the debut of its much-anticipated 2010 Mustang redesign.
“We have no plans to cut back on our show activity,” Ford spokesman Jay Ward said.
The nation’s second-largest automaker is planning to debut as many as five other vehicles at the Detroit show in January, according to a source at the company who spoke on condition of anonymity because he was not authorized to discuss such details.
But for many other car companies, shows have quickly become an unaffordable luxury.
For Suzuki, which sold 100,000 cars in the U.S. last year, spending money on the Detroit show no longer makes sense. Suzuki’s sales here are down 12% so far this year, and with no new models or concept cars to introduce, the company decided to give up on the Detroit confab.
Instead, the company is holding a small dinner for reporters before the show, avoiding the expense of transporting dozens of vehicles across the country, which can cost $10,000 a car. It is also saving the cost of renting floor space, sets and lighting, and employing a large staff at its booth.
“It’s a purely economic decision,” said Suzuki spokesman Jeff Holland, adding that “this is no reflection on the people of Detroit or on the city.”
Similar logic was applied by Ferrari, the Italian carmaker owned by Fiat. Although it is unveiling a new vehicle at the L.A. show, the 193-mph California, it has nothing new to exhibit in Detroit. So it canceled on the 101-year-old event, as did Land Rover, a unit of Indian carmaker Tata Motors, and Rolls-Royce, which is owned by BMW. (BMW will be in Detroit, however.)
“We are cutting back,” said Paul Ferraiolo, president of Rolls-Royce North America, which puts a $407,000 price tag on its Drophead Coupe. “Motor shows are expensive.”
As are the events surrounding them. In August, GM canceled GM Style, its huge kickoff party for the media at the Detroit show; on Tuesday, a Chrysler spokesman said the company was weighing whether to cut back on its legendary Detroit Firehouse Party.
Joe Serra, senior co-chairman of the Detroit show, said that only 60 exhibitors had confirmed for this year’s event, compared with 80 last year, but that there will still be plenty of action in Cobo Hall, where the North American International Auto Show is held.
Some car companies aren’t pulling out of shows but are cutting back. Volkswagen this week canceled its news conference at the L.A. show -- it had planned to debut a roadster concept car -- and rescheduled for Detroit.
Chrysler, with a severely curtailed new product schedule and sales that are down 25% through October compared with last year, has little to crow about. It long ago decided not to hold a news conference in Los Angeles, even though it has three new electric concept vehicles to show off -- exactly the kind of fare that California audiences salivate over.
To reduce costs, the automaker is unloading the price of running a display onto its network of Southern California car dealers. A Chrysler spokesman called the move normal, but it raised eyebrows in the rest of the industry.
“Corporate usually shoulders a big part of the expense,” said Barry Toepke, a public relations executive at automotive firm RWB.
Neither the Chicago Auto Show in February nor the New York International Auto Show in March has completed its exhibitor lists. Organizers for both shows say they are confident that few carmakers will drop out, but some changes are clear.
Paul Brian, spokesman for the Chicago show, said Chrysler would rent 15,000 fewer square feet of floor space than it did this year. Mark Schienberg, president of the Greater New York Auto Dealers Assn., which organizes the New York show, said GM and Ford would be taking less floor space, allowing smaller players like Mitsubishi to improve their position on the convention floor.
Of all carmakers, GM appears to be in the most difficult financial position. In July, it announced a $10-billion cost-reduction program, and last week said it would cut costs by an additional $5 billion. On Monday, a Deutsche Bank analyst set a zero 12-month price target for GM stock, which promptly hit a 59-year low. It fell an additional 13% on Tuesday, closing at $2.92, its lowest level since 1943.
The difficult times have led to across-the-board budget cuts, said GM spokesman Scott Fosgard, who oversees auto shows for the company.
GM scaled back in Los Angeles because it wanted to avoid the prospect that its vehicles would get overlooked in a rush of questions about the company’s health, Fosgard said. But it was also the cost: GM had planned to fly in and lodge about 25 reporters for the show, then rescinded the offer.
“It’s saving money, maybe 10% to 20% of my annual budget,” Fosgard said.