BIG 3 EAGER TO CURB DEALS

January 20, 2004—Automakers are pushing to curb runaway incentive costs after spending a record $44 billion in 2003 on cash rebates and cut-rate financing. While the deals have kept car and truck factories humming during tough economic times, they've also left the Big Three with paper-thin profit margins and a customer base that expects deeper and deeper discounts. Now the companies are counting on an economic recovery, revamped product lineups and improved quality to help wean buyers from discounts. Detroit's automakers also are quietly raising sticker prices and rolling out an unprecedented wave of innovative offers to woo incentive-hungry consumers while protecting profits. Despite these efforts, few predict a major decline in the deep discounts any time soon. DaimlerChrysler AG's Chrysler Group have boosted discounts. "Time will tell" if the automakers can lower incentives successfully, said Paul Ballew, GM's executive director of market and industry analysis. "I think the more operative question is, 'Do I see a time when the rate of increase in incentives ... is ebbing a bit?' (This year) will be a good test for that." Automakers have reason to be optimistic. December incentives averaged $2,803 per vehicle, Merrill Lynch analyst John Casesa wrote in a recent report. That represents a 19 percent increase compared to December 2002. Even so, the increase was less than previous months. "It is welcome news," Casesa said. (Detroit News)
http://www.detnews.com/2004/autosinsider/0401/20/a01-39343.htm

GM SEES DROP IN NET INCOME AS AUTOS MARKET HEATS UP

January 20, 2004—General Motor Corp.'s net income fell slightly in the fourth quarter, as foreign rivals increased their market share and sales incentives continued to erode the bottom line. The world's largest auto maker said Tuesday its profit slipped to $1.01 billion from $1.02 billion in the year-earlier quarter. GM, of Dearborn, Mich., struggled last year despite offering record sales incentives as Japanese auto makers branched into the sport-utility vehicle market. The auto maker ended 2003 with 28% of the U.S. market, down from 28.3% in 2002. The drop was a disappointment for the company, which had seen strong sales in late 2003 and hoped to notch a third consecutive year of market-share increases after a decade of going in reverse. It may be difficult for GM to get rid of sales incentives if demand doesn't hold up in 2004. Some analysts think the industry could sell as many as 17 million vehicles this year; that would be up from the 16.7 million sold in 2003, but down from 18.7 million in 2002. GM said Tuesday morning it expects global sales for the auto industry to rise about 3% in 2004, to a record 60 million vehicles, with 17.3 million of those in the U.S. The company said it expects $5 billion in operating cash in 2004, with first-quarter earnings of $1.75 a share excluding special terms. (Wall Street Journal)
http://www.wsj.com

CAR GIVEAWAYS INTENSIFY
DaimlerChrysler is latest automaker to bet free vehicle offer will snag attention in crowded market

January 20, 2004—Win-a-car promotions have made it to the big leagues. A grass-roots marketing tactic often associated with auto dealerships, fast-food chains and game shows has won the favor of major automakers more used to wooing buyers with slick television ads. Amid the heated competition in the U.S. auto market, automakers are open to any approach that might capture the attention of consumers juggling a dizzying array of vehicle choices. The latest entrant in the giveaway sweepstakes is DaimlerChrysler AG's Chrysler Group, which will announce its "Stand By Your Van" contest today. Twenty contestants will compete against each other in an endurance test to see who can keep one hand planted on a new minivan the longest. Contest planners expect participants to be on their feet for more than 72 hours in pursuit of the top prize—a 2005 Chrysler Town & Country minivan or a 2005 Dodge Grand Caravan. Such wild giveaway contests could become the norm as domestic automakers elbow it out for sales in the increasingly crowded U.S. auto market where cash rebates and low-rate loans are no longer enough to stand out from the crowd. General Motors Corp. made a big splash earlier this month with the announcement of its 56-day, 1,000-vehicle "Hot Button" giveaway. "Floor traffic (in dealerships) is up 30 to 40 percent in what would ordinarily be a slow time of the year," said Steve Hill, director of retail planning for GM. Regardless of whether people buy new vehicles, "you're planting a seed that's really important for future vehicle consideration." (Detroit News)
http://www.detnews.com/2004/autosinsider/0401/20/b01-40510.htm

GM SEES MORE INDUSTRY-WIDE U.S. CAR SALES IN JANUARY

January 16, 2004—General Motors expects U.S. vehicle sales to strengthen industry-wide in January, with its own results helped by the giveaway of 1,000 cars and trucks over the next two months. Gary Cowger (pictured), head of GM's North American automotive operations, said industry-wide sales will total a seasonally adjusted annual rate of between 16.6 million to 17.0 million in January, above a rate of 16.3 million in January last year. Excluding medium- and heavy-duty trucks, Cowger's rate translates to overall sales of between 16.2 million to 16.6 million compared with 15.9 million last year. "That's a wide range, but you just can't tell, because the last week defines the market," Cowger told reporters following a speech at a conference sponsored by Automotive News late Wednesday. More than 42,000 people visited a GM dealership in the first two days last week of the automaker's "Hot Button" giveaway of 1,000 cars and trucks through the end of February, Cowger said. The $50 million marketing program, which GM bills as the largest in automotive history, is aimed at helping GM boost its sales through one of the slowest periods and above last year's slow start to the year. Cowger also said GM has offered Cadillac dealers some incentives on the new SRX SUV, to smooth out inventories. Cowger said the bulk of SRXs that GM initially delivered to dealers were pricey, high-end models with V8 engines and many options included, such as DVD players and a sunroof. But consumers in many parts of the country want the SRX with the V6 engine, he said. "I think that was really our problem for getting the wrong mix (of vehicles) out there," Cowger said. "They ended up being fairly pricey out there. Then when the V6 came in, you had quite a discrepancy (in prices), not just because of the powertrain, but because we loaded up those first ones." (Reuters)
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=4134851

MORE VEHICLES SOLD WITH ALL-WHEEL DRIVES

January 16, 2004—Can it really be that 80 percent of the buyers of the Honda CR-V and Cadillac Escalade sport utility vehicles live in wintry climates and-or drive off road? You might be tempted to think so. After all, 80 percent of the CR-Vs and Escalades purchased by consumers last year had four- or all-wheel drive, according to automaker sales figures. But auto analysts said the real reasons record numbers of consumers—including residents of such sunny locales as Southern California and Florida—are winding up in vehicles where power can go to all four wheels often has little to do with winter weather and off-road adventures. It's more a result of auto industry trends, such as the kinds of vehicles people are buying these days, what's available on dealer lots, new, four-wheel technology that's more compact and lighter weight than in the past, and rising numbers of new vehicles that come with four- or all-wheel drive, they said. In the 2004 model year, consumers will find more than 80 cars, SUVs and vans available with four- or all-wheel drive. As you'd expect with today's popularity of SUVs and so-called crossover vehicles that combine attributes of SUVs and cars, many of the newest models are SUVs and crossovers. And they naturally are offered with four-wheel power. This is up from just over 30 cars, vans and SUVs offered with four- and all-wheel drive 10 years ago, in the 1994 model year. (Associated Press)
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SATURN COUNTING ON NEW MODELS TO REVIVE ITS FLAGGING SALES

January 16, 2004—For a brand that limped along with only one product for much of the '90s, the next few years will bring an avalanche of new cars and trucks to Saturn dealerships. A minivan, the 2005 Saturn Relay, arrives this fall. Then, by 2007, a small sporty car and a sport-utility bigger than the Vue that's in Saturn's current lineup are due. And a Saturn concept, the Curve sports car, is turning heads this week at the North American International Auto Show in Detroit. With the Relay, the Curve and the other new models, top General Motors executives acknowledge that mistakes have been made along the way. Saturn's sales, which fell 3.2 percent to 271,157 in 2003, have been stagnant for the past half decade. "It's true that Saturn is not doing as well as we would like,'' said Bob Lutz, vice chairman for product development at the world's biggest automaker and its North American chairman. But, said Lutz in an interview last week, Saturn is "worth fixing." To do that, GM is committing "very large amounts of money'' to developing new Saturn models. In most cases, they will be vehicles that are shared with other GM divisions, something that hasn't happened in the past. "It's clear that we have a very strong commitment to the Saturn brand,'' Lutz said. One of the reasons, he said, is that it is better than other GM divisions at attracting buyers who might consider imports. (San Jose Mercury News)
http://www.mercurynews.com/mld/mercurynews/business/industries/automotive/ 7725211.htm

TOYOTA EXPLORES ITS OPTIONS FOR EXPANDING LEXUS BRAND

January 16, 2004—Toyota Motor Corp. wants to grow its Lexus brand significantly by beefing up a sporty entry-level luxury model and possibly adding to its product line a couple of vehicles that would be priced above $70,000, putting Lexus in direct competition with Mercedes and BMW. Denny Clements, head of the Lexus brand and a senior executive at Toyota's U.S. sales unit in Torrance, Calif., said he couldn't be happier with the way his brand is performing. Lexus sold a total of 259,755 vehicles last year, up 11% from 2002. Still, he said unleashing an assault on BMW's near monopoly on younger buyers with its 3-Series cars and Mercedes' equally strong grip on consumers buying luxury cars priced above $70,000 "should give us a huge opportunity to grow Lexus." He said he is aiming to boost Lexus sales to 350,000 vehicles a year within the next five years, though its sales this year are likely to show only a modest increase at best. In the entry-level luxury segment, which has been growing as vigorously as the segment for luxury cars selling for $70,000 or above, Mr. Clements said Lexus is looking to offer more body styles and other variants for the redesigned IS model in an effort to dislodge BMW's near monopoly on sporty, entry-level luxury-car buyers. Lexus hasn't said exactly when the redesigned IS would arrive in dealer showrooms, but one Toyota official said it should come within the next two to three years. (Wall Street Journal)
http://www.wsj.com

NADA MEMBERSHIP TOPS RECORD

January 15, 2004 —More than 93 percent of U.S. franchised new-car and -truck dealers are members of the National Automobile Dealers Association, breaking a record set a year ago. New NADA membership reached 20,160 of the 21,650 franchised new-car dealers nationwide last year, an increase of 369. "This shows the effectiveness and value of NADA, as well as the commitment by dealers to work together for industry progress," said Alan Starling, NADA chairman. "As a result, we are a stronger and more unified industry, better positioned to serve our customers well in 2004 and beyond."