Shiny cars, dull outlook
US automakers turn from SUVs and pickups as the economy weakens and gasoline prices increase
NEW YORK - Inside the Jacob K. Javits Convention Center, shiny dreams are on display at the New York International Auto Show.
Outside, the reality for the automobile industry is not so bright: The US economy, battered by the credit crisis, a weak dollar, and soaring food and gasoline prices, could lead to the worst year for domestic auto sales in more than a decade, industry analysts say.
But not all is doom and gloom. A move toward building and promoting more passenger cars - after years of SUVs and pickup trucks generating hefty profits - might help automakers mitigate the damage.
Global Insight, a research and consulting firm in Lexington, Mass., has predicted a 2008 drop in North American sales to around 15 million and may soon lower projections more. That is down from sales of just over 16 million last year and 16.56 million in 2006. Research firm J.D. Power and Associates, has already deflated its 2008 projected sales to 14.95 million from 15.7 million.
"This is a wild business right now," said John Wolkonowicz, Global Insight's senior auto group market analyst for North America. He said this year's display of cars at the show, which opened yesterday, may be the last of its kind because of federal pressure and customer demand for improved fuel economy and technology, meaning the days may be numbered for cars such as the reborn Chevrolet Camaro,
But as automakers move toward better efficiency in response to the financial climate, Wolkonowicz said, they must be careful not to repeat the mistakes they made in the '70s, when the oil crisis spawned a crop of bland, poorly made models.
"They had darn well better not react to this the way they did the last time," he said. "Some of them may not make it through."
That is partially because of the competition from overseas, Wolkonowicz added. Foreign automakers are well positioned to dominate the global market for cars, he said, something that was not the case three decades ago.
Rebecca A. Lindland, director of industry research for the Americas at Global Insight, said the relative downplaying of SUVs and trucks at the New York show points to the direction US manufacturers are taking. "They have to be looking at cars," she said.
Indeed, Acura, in introducing its new TSX here, proclaimed 2008 "the year of the sedan."
"We'd be struggling," without a move to new cars such as the Chevrolet Malibu, LaNeve added.
Robert L. Nardelli, chairman and chief executive of Chrysler LLC - recently separated from its German ownership - promised the company will take an "aggressively conservative" approach that includes the elimination of such models as the Durango, PT Cruiser, and Pacifica.
Unlike some other manufacturers and analysts, Nardelli said, Chrysler has not built a second-half resurgence into plans to regain profitability this year. But he vowed a quick and definitive response to market trends, saying Chrysler will offer "a quick yes, a quick no, but never a slow maybe" when it comes to contemplating changes.
Chrysler, like other companies, is also looking for most of its growth in overseas sales.
For the present, however, US automakers will be focused on keeping domestic sales from falling lower than analysts' projections. That may depend on how far the country sinks into recession, and how long it lasts.
"It's going to be a tough market in 2008," said David Champion, senior director of Consumer Reports' auto test center. "If it hasn't hit bottom yet, we're getting close."
Still, despite the financial downturn that will keep many people away from showrooms, he and other industry observers insist consumers' love affair with autos is not on the rocks.
"Americans will always dream about cars," Champion said. "It's an expression of yourself in many ways."
Royal Ford can be reached at ford@globe.com.
