2003 Detroit Auto Show, Part IX Page 3

January 8, 2003

2003 Kia KCD-1 Slice concept

Ambrose noted that the firm’s results quantify speculation that customer loyalty has dropped significantly in the past year due to increased incentives. Only 19 percent of executives polled (down from 33 percent last year) expected consumer loyalty to rise within the next five years.

With cost cutting about the only way for automakers to return to profitability, suppliers are being expected to take the fall. So it’s not surprising that 74 percent of those polled expected that “suppliers would continue to consolidate.”

Since cars are still selling well, but manufacturers are taking the loss, dealership loyalty has made a strong move up. The bottom line is that dealerships are making money, industry isn’t.

Respondents agreed that overcapacity is not a global problem, but rather one that is unique to the North American—and to some degree, European—markets. Market-share issues—and not market-by-market issues—are to blame.

Ambrose also added that the automakers would have many other obstacles to overcome in being profitable this year. Among them: pension costs. Due to the poor stock market and underperforming economy, automakers will have foot the bill for lost pension values. –Bengt Halvorson

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