The champagne was flowing, the shrimp were plump and plentiful. For someone accidentally strolling into the DaimlerChrysler reception at the annual convention of the National Automobile Dealers Association, it might have been difficult to tell that the automaker was in dire straits.
There are, of course, traditions to maintain, and the annual NADA event is time for abundant excess, in keeping with its venue, this year, the Las Vegas Strip. The convention drew more than 10,000 dealers this year to network, attend industry meetings and motivational sessions—and in their off-hours, golf and gamble.
But despite all the food, and entertainment by the likes John Tesh and an assortment of celebrity look-alikes, there was no hiding the undercurrent of concern and even fear. In the wake of the best year in U.S. automotive history, most forecasts call for a sizable downturn in sales this year. Oldsmobile, the oldest nameplate in the American market, is being killed off. And Chrysler is demanding sizable concessions from its dealers in the wake of its mounting losses.
So while it wasn’t quite “Fear and Loathing in Las Vegas,” the mood was not as upbeat as one might first assume walking into any of the lavish receptions at casinos like the Mirage, Bally’s or the Bellagio.
The uncertainty is understandable considering the year began on a horrible note, with December sales plunging to recessionary levels. From last year’s 18 million sales, most forecasts call for 2001 volume to slip to somewhere between 16.0 million and 16.5 million. But January’s numbers, released just before the NADA conference began, showed a surprising resurgence, and buoyed by two Federal Reserve rate cuts, the mood of the industry has actually turned a bit more upbeat in recent weeks.
“We’re in hard-to-tell land,” suggested Jim Schroer, Ford Motor Co.’s Vice President of Global Marketing. “Everyone’s said the sky is falling, but maybe all the doom-and-gloom-sayers are wrong.”
At NADA, it depended, of course, on what badge you were wearing. The conference’s most contentious moments came at a special meeting between Oldsmobile dealers and General Motors officials. Citing 10 years of continuous losses, the automaker announced on December 12th that it would phase out the 102-year-old division. More than a few dealers had hoped they could convince GM to reverse its decision.
“We have to face reality,” admitted St. Paul, Minn., Olds dealer Wally McCarthy, “Oldsmobile is gone.”
Chrysler’s “make” meeting created another flash point, dealers enraged at having to make concessions in the wake of the automaker’s worsening losses—estimated at $1.5 billion for the fourth quarter of 2000.
At spiritual home
Dealers are, by nature, a bipolar lot. Their moods can swing as fast as a monthly sales chart. But they are also, by nature, bullish and confident salespeople. Las Vegas is, in a sense, their spiritual home.
The last few years haven’t been easy on automotive retailers. Since the early 1990s, every NADA convention seemed to bring an assault by a new wave of entrepreneurs promising to transform the car-buying process, a business many liken to dental surgery.
There were the automotive superstores, which promised to simplify the buying process by offering customers 1000 or more cars on a single lot. There were the corporate consolidators, who promised to yield vast savings by transforming a business long dominated by family-ownership. And most recently, there were the dot-coms, which insisted that they were the true, digital salvation.
Most of the superstores have closed. Many of the consolidators are gone. Others have seen their earnings and stock valuations collapse. And as for the Internet dealers, an increasing number are now dot-gone. The NADA conference began with news that Greenlight.com, one of the more promising sites, had sold off to CarsDirect.
“We’ve seen considerable consolidation in the last six months,” said CarsDirect CEO Bob Brisco. “I expect to see substantially more in the next 12 to 18 months.”
No one expects the Internet to go away. But the challenge is to come up with a formula that works. Early “third-party” operations, such as Autobytel.com, which simply provide leads to dealers for a fee, seem the most endangered. The odds seem more in favor of company-owned or supported sites, including FordDirect, which is primarily owned by Ford dealers.
“At the end of the day,” said Schroer, “bricks-and-clicks are going to win.”
The theme of this year’s NADA conference was “a Time for Change,” and few dealers would argue that the business of retailing cars and trucks has a long way to go. It needs to become far more customer friendly and a lot more efficient. The number of individual dealers has been on a steady decline for decades, and the shakeout seems certain to continue.
But “there’s a quiet confidence here that dealers are part of the solution,” said J. Ferron, director of automotive practices with the consulting firm, PricewaterhouseCoopers. “They’re not going to be cut out.”
For more TCC coverage on the 2001 NADA show, click here.
For more coverage on the NADA convention, visit Automotive Executive Magazine (www.aemag.com).
Olds Axed: TCC Special Report (Dec. 30, 2000)