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American Auto Sales Slump: Foreign Product Reigns in Auto Industry

Friday, February 23, 2001 at 7:19 AM

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Sales of Chevrolet, Ford and Chrysler products started slowing down at the end of last year and the slump continued into January. Car dealers blame fears of a slowing economy and the falling stock market for putting a vise on the wallets of many consumers. But while American car companies reported double digit declines in January, it was very different story for their foreign competitors. Mike West reports.

Mike West- In January, BMW boasted a 10% sales increase, American Honda racked up an 11% rise, Mitsubishi started 2001 with a bang by lifting sales by over 15%, and the list goes on and on. It appears, that for some reason, Americans would rather buy imports. The big question is why. And there are lots of theories. Susan Helper is an assistant professor of economics at the Weatherhead School of Management.

Susan Helper- My first thought was, maybe it was that people were looking for, consumers were looking for a car that gets a little bit higher gas mileage, and I’d hoped that that was true. But when I actually looked at the data, it looked like across the board that sales of big three cars including smaller cars like the Focus and the Neon are also down.

MW- So if the higher gas prices aren’t steering people away from American cars, maybe their quality has come into question. American auto dealers and manufacturers insist we build em’ as well as anyone. But Helper says research shows conflicting results.

SH- There’s two commonly used measures of quality - one is a company called J.D. Power that does a survey of consumers after 6 months. And on those rankings the Japanese and the U.S. are not so far apart. But another survey that people look at is what Consumer Reports does, which is a survey of car owners after a few years of car ownership about the frequency of repair. And there they do find, continue to find significant gaps between American and Japanese cars particularly on the small cars, the Japanese cars are really much more reliable.

MW- Samantha Baker is the sales manager at a local Audi dealership. She says the downturn in American auto sales doesn’t mean a thing at her car lot. She says her customers are different from American car buyers, they have more money.

Samantha Baker- They might see a down trend in the stock market or something like that, but they have kind of a nest egg built up that, you know if they tapped into it and bought a $40,000 car, it’s not going to affect them like it would, more of a blue collar worker who probably doesn’t have as much saved up to go and buy a car so I think our customers, I wouldn’t say are more stable, but they might be.

MW- Baker also feels quality is a big reason customers are drawn to European and Japanese cars. Some people strongly disagree quality is the problem. Pat Lally is the co-owner of a cleveland Chevrolet dealership.

Pat Lally- No longer so I see there being a big disparity between of quality like we have seen in past decades. I believe our quality is right on line or right on par. And our safety standards we have in our cars are right where they need to be.

MW- Lally feels at least part of the slump can be traced to the graying of the American car showroom. He says most owners and managers are in there 50’s and 60’s and don’t want to spend money on improvements for their buildings or service departments. He says some feel they simply don’t have to. In contrast his dealership has invested in a huge building where there’s plenty of indoor showroom space, a small theater, even computer terminals, games and a day care center. It’s all designed to give customers lots of extras that will help them bond with the dealer.

PL- But I think it’s the marketing and what you present to the customer and what you show them helps you sell cars and I think we’re doing a good job of it here. I think there are a lot of import stores that are, have had to do that here, had to get themselves on line and I’m not talking about the main line Toyota and Honda stores. I’m looking at Mitsubishi and Hyundai, and Kia and Daewoo they had to get themselves in the game. They did it by old fashion selling and marketing and good looking facilities and taking things in that direction, where some of the old domestic lines haven’t done it that way.

MW- Lally says another problem for the American car dealer is there are simply too many competing dealerships. That’s in contrast to a much smaller number of import lots in the same area. Plus most foreign dealerships have buildings less than 15 years old.

Gary Adams of the Greater Cleveland Auto Dealers Association feels American car makers are now facing another challenge and that is the way today’s consumers where raised. Their child cars seats are likely to have been strapped to the back seat of an import.

Gary Adams- The thing that happened earlier is that the domestics lost a generation of buyer, and I’m in my late forties for example and probably my generation that they lost. And while they’re trying to get back that generation, have made some in-roads certainly it’s doubtful that they can ever get em’ back because make buying decisions and they stick with them. You have then family members of our generation for example that have ridden in a toyota or honda for example in their youth, they like the vehicle and they stick with it.

MW- There are some bright spots for american auto makers. Pick-up trucks made by the big 3 dominate the sales charts and the U.S.-made SUV’s are still the king. And even the definition of an American car company is getting fuzzy, there’s Daimler/Chrysler, Ford owns parts of Jaguar, Volvo and Land Rover. Toyota has become one of the largest employers of auto workers in Ohio and many so called American cars are made in Canada and Mexico. In Cleveland, Mike West, 90.3 WCPN, 90.3 FM.

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