Week of January 31, 2000 Page 2

January 31, 2000

AMERICAN LUXURY LOSING POPULARITY When it comes to luxury vehicles, the European brands are gaining popularity with American buyers, according to a CNW Marketing/Research's annual "Aspiration Index." For 1999, 23 percent of Americans had a European luxury vehicle on their shopping list, up from just 11 percent in 1990. Some 38 percent of Americans had Lincoln and Cadillac models on the list, down from 66 percent in 1990. The biggest change was among the under-30 shoppers; barely 14 percent wanted a domestic brand, down from 26 percent in 1990.


GM, DEALERS KISS AND MAKE UP After months of animosity between dealers and General Motors, the automaker assured them that its plan to buy up 10 percent of its dealers was completely dead. Chairman and CEO Jack Smith addressed dealers at the NADA Convention, promising to include them in initiatives such as regional advertising, Internet sales and manufacturer-owned stores — the things that have put them at odds in the past. "If you want to know if we learned our lesson, you can bet your sweet bibby we learned our lesson," said Roy Roberts, retiring VP of vehicle sales and marketing.


ABT: NO MORE MIDDLEMAN Autobytel.com announced at the NADA Convention this week that it would now act as a car broker, selling cars directly over the Internet through its AutobytelDIRECT.com (www.autobyteldirect.com) Web site. The new service allows buyers to choose, finance and take delivery, all without going to a dealer. The company still must obtain its vehicles through dealers, who will pay the company $100-$300 per vehicle they sell to AutobytelDIRECT.com. Because of competition from online buying sites, some manufacturers may change their pricing to reflect the dealer’s price, versus the retail price. Ford is currently testing a program with this pricing structure in Tucson, Ariz.


DEALERS FIGHTING ONLINE SALES Dealers are fighting Internet companies who are selling vehicles directly to consumers by pushing state governments to pass laws against such practices. Dealers have already succeeded in getting tighter franchise laws in nine states, causing lawsuits in some states including Texas, according to an article in The New York Times. General Motors, which has most recently has been at odds with its dealers, sided with them saying that such Internet companies could be "cut out" if the manufacturer and its dealers work together. Roy Roberts, retiring VP of sales and marketing for GM, told dealers that the company would work closely with them so buyers would not feel they needed to use an independent online company to purchase a vehicle.


GM MERGES CARS, TRUCKS In an effort to improve vehicle development times and to reduce costs, General Motors said it would combine the car and truck groups in North America. The integration, which GM says will eliminate duplicate processes, will begin in the first quarter and be complete within the next 18 months. GM North American President Ron Zarrella called the integration, "a logical next step in leveraging the common business processes and systems, vehicle platforms and components that laid the foundation for GM’s global automotive organization announced over one year ago."


KOREANS READY FOR BATTLE The Korea Federation of Small and Medium Business (KFSB) is stepping up its plan to block the sale of Daewoo Motor to a foreign buyer. Believing that 1.7 million Korean jobs are at stake, the company said it was prepared to raise as much as 1.7 trillion won ($1.5 billion) to gain control of the company. Analysts, who don’t believe the group is capable of running an automaker, suggested that the move might be a play to raise the price of the company, rather than take it over. Several global automakers, including General Motors, Ford, and Hyundai, have expressed interest in taking over Daewoo’s automotive unit.


FORD REPORTS 1999 EARNINGS Ford reported record earnings of $7.24 billion in 1999, more than any other automaker in history, with overall revenues increasing by 13 percent. Fourth-quarter profits jumped 73 percent to $1.81 billion, but investors and analysts are still concerned about the company. Many feel Ford is not cutting costs in Europe quickly enough and are disappointed there are no plans to buy back stock. Ford CFO Henry Wallace said that European plant closures were a possibility.

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