The 'R' word haunts Detroit 3

[Biker16]

The 'R' word haunts Detroit 3

Even good times are tough; a recession would be devastating

 

John K. Teahen Jr.

Automotive News

September 17, 2007 - 12:01 am EST

 

Then and now

The last time sales were below 16 million -- in 1998 -- the Detroit 3 had much greater share.

Detroit 3 Market Share

2007 (Jan.-Aug) 51.30%

1998 70.20%

 

 

Can the situation get any worse for the Detroit 3? You better believe it.

 

Suppose for a moment that the U.S. economy slips into a full-fledged recession.

 

Suppose the U.S. market falls to 14 million, from today's 16-plus million (and swings of that magnitude are not unusual in a recession). What then?

 

"Armageddon," says Erich Merkle, auto analyst at IRM Inc. in Grand Rapids, Mich.

 

These are not happy days for the Detroit 3. Sales are down 7.9 percent this year, and car sales have declined a staggering 13.5 percent. Combined market share for General Motors, Ford Motor Co. and Chrysler LLC continues to erode, plunging almost 3 percentage points in the first eight months of this year.

 

But the other shoe has yet to drop. The U.S. companies have been bleeding market share for years in a robust market. New-vehicle sales in the country haven't dipped below 16 million since 1998.

 

Now there are signs of an auto recession.

 

Car-truck sales have trailed 2006 in six of the eight months this year, and sales have been down for three months in a row. That is unusual.

 

The number of people with jobs declined 4,000 last month; the experts had expected a gain of at least 110,000. It was the first monthly decline in four years.

 

 

http://www.autonews.com/apps/pbcs.dll/arti...78&refsect=

[NickF1011]

Lower end brands like Kia and Suzuki have got to be praying for recession. I imagine cheaper vehicles will leap in sales as people are less inclined to spend money on big ticket items. People will still refuse to stop buying -- they'll just buy something that costs a little less. It would hurt the big money items like fullsize pickups pretty badly though. Hopefully the economy can keep treading water until Ford gets its small car entries ready.

[jasonj80]

Lower end brands like Kia and Suzuki have got to be praying for recession. I imagine cheaper vehicles will leap in sales as people are less inclined to spend money on big ticket items. People will still refuse to stop buying -- they'll just buy something that costs a little less. It would hurt the big money items like fullsize pickups pretty badly though. Hopefully the economy can keep treading water until Ford gets its small car entries ready.

 

 

It is actually the opposite of that, in a recession higher priced vehicles see less of a drop off than lower priced one, an example would be sales of 5 series and 7 series BMW are not impacted that much, however 3 series would take a pounding as people that buy 3 series are more financially impacted by an economic downturn.

 

lowincome and mainstream buyers are greatly impacted by a downturn and will postpone purchases until the economy picks up and will go to used cars or repair their exsisting car, wealthy buys have money and less impacted buy a down turn. Now a depression is another story, everyone takes a pounding.

[NickF1011]

It is actually the opposite of that, in a recession higher priced vehicles see less of a drop off than lower priced one, an example would be sales of 5 series and 7 series BMW are not impacted that much, however 3 series would take a pounding as people that buy 3 series are more financially impacted by an economic downturn.

 

lowincome and mainstream buyers are greatly impacted by a downturn and will postpone purchases until the economy picks up and will go to used cars or repair their exsisting car, wealthy buys have money and less impacted buy a down turn. Now a depression is another story, everyone takes a pounding.

 

A 3-series is not a low end car, no matter how you slice the pie. I'm talking sales leaders like the Camry, Accord, and Impala taking a hit while cars like the Civic, Corolla, and Cobalt would probably see a rise. Of course those people with more money than sense will continue to buy their $70,000 luxo-barges.

[Footballfan]

_uck the Automotive News. They are equavialnt to the National Enquirer and Weekly World News. They, like the rest of the Detroit media, have been rooting for a train wreck of the Big Three.

 

There is a silver lining to a recession for the Big Three: oil and gasoline prices are sure to fall, and that could help GM, Ford, and Chrysler move more larger trucks in lieu of Toyotas and Hondas. Remember during the trough of the last recession, the price of a barrel of oil was well under $20.

[kevinb120]

A 3-series is not a low end car, no matter how you slice the pie. I'm talking sales leaders like the Camry, Accord, and Impala taking a hit while cars like the Civic, Corolla, and Cobalt would probably see a rise. Of course those people with more money than sense will continue to buy their $70,000 luxo-barges.

 

 

3 and C class cars are low end cars(not to mention the G/TL wannabe's). Typically they are 'yuppie's first car' and are often leased to cash-poor budding middle-class people fresh out of college. Most are quite strapped for liquid cash with student loans, too much house, too many credit cards, and too expensive a car to fit-in with the group at the new corporate job. Someone buying an S-class doesn't worry about recessions. These people tend to take the biggest hits in recessions as they have tons of stuff to loose they don't even own. In my little yuppie condo community, about 60% of the vehicles are one of those 4 cars.

Edited September 19, 2007 by kevinb120

[suv_guy_19]

3 and C class cars are low end cars(not to mention the G/TL wannabe's). Typically they are 'yuppie's first car' and are often leased to cash-poor budding middle-class people fresh out of college. Most are quite strapped for liquid cash with student loans, too much house, too many credit cards, and too expensive a car to fit-in with the group at the new corporate job. Someone buying an S-class doesn't worry about recessions. These people tend to take the biggest hits in recessions as they have tons of stuff to loose they don't even own.

 

 

They aren't low end cars, and most of them are not bought by people who are cash strapped. They are not high end luxury cars, no, but to call them low end is plain wrong.

[kevinb120]

They aren't low end cars, and most of them are not bought by people who are cash strapped. They are not high end luxury cars, no, but to call them low end is plain wrong.

 

 

They are around here. I just added "In my little yuppie condo community, about 60% of the vehicles are one of those 4 cars." If you can afford a BMW, you get a 540+, if you want to look like you can, you lease a 3. Then again, 'starter' townhomes within a 1 1/2 hours commute around here are about 600k. So yes, there are tons of C class/3 series around here that are less then 2 years old. You also see a lot of 0-option 525's too. Of course they are not 'low end' like an economy car, but they are for people who stretch the budget for something frivolous. I'm not talking about the 'normal' low-priced vehicles, those and the ultra high-end stuff doesn't fluxuate much in sales during recessions. If you don't have much to spend and have a working Focus, or you just don't care about what you drive in general, you probably aren't looking at the newest model cars RIGHT AWAY in the first place. With extremely durable modern vehicles, the $30K-$50K market is probably the most fragile.

[Ford Jellymoulds]

British Airways is pulling the plug on its Detroit routes after 50 years why?

 

 

http://www.cnbc.com/id/20873792/

[J-150]

They aren't low end cars, and most of them are not bought by people who are cash strapped. They are not high end luxury cars, no, but to call them low end is plain wrong.

 

 

then please explain the ultra low lease rates on 3s and Cs.

 

I know people that bought 3s that otherwise would have bought a Taurus or Camry. Why? The lease rate was the same.

 

I don't know about you, but when a 3 series is costing the same as a Taurus, Camry, Accord, then it is as low end as those cards.

[Biker16]

then please explain the ultra low lease rates on 3s and Cs.

 

I know people that bought 3s that otherwise would have bought a Taurus or Camry. Why? The lease rate was the same.

 

I don't know about you, but when a 3 series is costing the same as a Taurus, Camry, Accord, then it is as low end as those cards.

 

luxury cars have higher residuals. thus lower leases.

[grbeck]

A 3-series is not a low end car, no matter how you slice the pie. I'm talking sales leaders like the Camry, Accord, and Impala taking a hit while cars like the Civic, Corolla, and Cobalt would probably see a rise. Of course those people with more money than sense will continue to buy their $70,000 luxo-barges.

 

A few months ago a magazine ran an article listing the income levels of customers of the six largest car companies. Honda and Toyota customers have the highest income levels, while GM customers have the lowest. If a recession does hit, I'll bet that retail sales of the Impala and Cobalt will be hit harder than retail sales of the Accord, Civic, Camry and Corolla, as the customer base is more likely to be hurt.

 

Since the Impala and Cobalt are fleet queens, GM would probably use fleet customers to prop up sales, but that would further hammer the resale value of those retail customers who do buy those vehicles.

[Michael Reynolds]

Hmmm, I wouldn't be so quick to generalize. Those wonderfully low lease rates that you see on TV or in the newspaper are stripped down models, that no one ever has, which require 4,000 down. I'm here to tell ya that when you start piling options on those lowly 3s, Cs, Gs and IS' the payments shoot north pretty damn fast.

 

And yeah BMWs carry some of the highest residuals out there, higher than that of Honda (which is constantly considered the gold standard). A higher residual in 3 years means that you are paying less depreciation, which means your payment is going to be lower. It has crap to do about a car being low end.

[J-150]

Hmmm, I wouldn't be so quick to generalize. Those wonderfully low lease rates that you see on TV or in the newspaper are stripped down models, that no one ever has, which require 4,000 down. I'm here to tell ya that when you start piling options on those lowly 3s, Cs, Gs and IS' the payments shoot north pretty damn fast.

 

And yeah BMWs carry some of the highest residuals out there, higher than that of Honda (which is constantly considered the gold standard). A higher residual in 3 years means that you are paying less depreciation, which means your payment is going to be lower. It has crap to do about a car being low end.

 

 

Yes, but the absolute low cost out the door still puts 3s and Cs in the hands of Camry/Accord/Taurus buyers

 

So Kevin's statement still holds some truth to it.

[Michael Reynolds]

Yes, but the absolute low cost out the door still puts 3s and Cs in the hands of Camry/Accord/Taurus buyers

 

So Kevin's statement still holds some truth to it.

 

The same people that would walk out the door with a 0 down 299 a month Camry lease? I doubt it? Who in their right mind puts 4K down on a lease? BTW, my statements had more to do with people driving 'the poor folks luxury vehicle' and not being able to afford them vs. the sales those vehicles steal from more mainstream vehicles.

Edited September 21, 2007 by Michael Reynolds

[NickF1011]

Yes, but the absolute low cost out the door still puts 3s and Cs in the hands of Camry/Accord/Taurus buyers

 

So Kevin's statement still holds some truth to it.

 

Very little truth. Very very little. I'm seriously considering a 3-series for my next car. Why? Because I don't want a car any larger than that but I want something nice. The way I spec'ed out even a 328i to my liking it ended up pushing upward of around $42,000 -- hardly anywhere near the ballpark of Camrys and Accords. The 335i was more to my liking though, and that jumped up to somewhere around $46,000.

 

It's pretty easy to spot the people driving BMW's who can't afford a BMW. Just look for leatherette interior and base wheels.

 

And no, I won't be leasing the thing.

[jpd80]

Nick, Ford should be chasing people like you with a 3 Series alternative (I won't say competitor).

There must be hundreds of thousands of people out there like you looking for a niche car like a BMW.

Surely, Ford must realise there are sales going begging get off their asses and start making

something distinctive and luxurious for people like you.

[NickF1011]

Nick, Ford should be chasing people like you with a 3 Series alternative (I won't say competitor).

There must be hundreds of thousands of people out there like you looking for a niche car like a BMW.

Surely, Ford must realise there are sales going begging get off their asses and start making

something distinctive and luxurious for people like you.

 

Well, my hope is eventually the MKZ will morph into something a bit more palatable for for more performance-oriented folk like myself...that's probably awhile off though. Although, an AWD MKZ with a 3.7 and sport suspension might come pretty darn close.

[Michael Reynolds]

Very little truth. Very very little. I'm seriously considering a 3-series for my next car. Why? Because I don't want a car any larger than that but I want something nice. The way I spec'ed out even a 328i to my liking it ended up pushing upward of around $42,000 -- hardly anywhere near the ballpark of Camrys and Accords. The 335i was more to my liking though, and that jumped up to somewhere around $46,000.

 

It's pretty easy to spot the people driving BMW's who can't afford a BMW. Just look for leatherette interior and base wheels.

 

And no, I won't be leasing the thing.

 

My sentiments exactly. Every and anyone that has purchased/leased a new car as of late should know that.

 

Ford needs to suck it up, and make a performance package for the MKZ. It's not like its going to cost them a ton of money because all the bolt ons are there (rear sway bars, springs, etc). Add better bolstered seats, a much improved braking system, a retuned D35 using premium and a few interior improvements and voila. The MKZ as it currently stands is WAY too soft. We test drove one, and while there were many things we liked about the car (namely the price tag), it came up short dynamically and feature content wise. I swear that car is 85% of the way there.

[Edstock]

Ford needs to suck it up, and make a performance package for the MKZ. It's not like its going to cost them a ton of money because all the bolt ons are there (rear sway bars, springs, etc). Add better bolstered seats, a much improved braking system, a retuned D35 using premium and a few interior improvements and voila. The MKZ as it currently stands is WAY too soft. We test drove one, and while there were many things we liked about the car (namely the price tag), it came up short dynamically and feature content wise. I swear that car is 85% of the way there.

 

YES!

[NickF1011]

Back to the 3-series being as affordable as a Camry or Accord....that's also just pure bunk on every level. While the starting MSRP is pretty low, dealers simply do NOT stock stripper 3-series on their lots. BMW has also discontinued the lower-priced 325i and simplified it to only 328 and 335 (Excluding M models). Look at the online inventories of any BMW dealer. You'll find that most of their 3-series in stock start at a bare minimum of around $35K with many of them listed well over $40K. People don't cross-shop Camrys and BMW's.

[Ford Jellymoulds]

Back to the 3-series being as affordable as a Camry or Accord....that's also just pure bunk on every level. While the starting MSRP is pretty low, dealers simply do NOT stock stripper 3-series on their lots. BMW has also discontinued the lower-priced 325i and simplified it to only 328 and 335 (Excluding M models). Look at the online inventories of any BMW dealer. You'll find that most of their 3-series in stock start at a bare minimum of around $35K with many of them listed well over $40K. People don't cross-shop Camrys and BMW's.

 

Ford & GM don't get a tax rebate for every car it sells in Germany, but the German government will give BMW a 19% tax rebate for every BMW it sells in the USA. So BMW can afford to under price it and still make a wopping great profit.

 

U.S. financial generosity to our allies after World War II included giving them special trade advantages to help them speed up their post-war recovery. We agreed that they could rebate to their producers any indirect taxes they paid on goods they exported to us, and they could also impose an equal charge on any U.S. products they imported.

 

Those nations recovered from World War II many years ago, but they still cling to what started out as a little advantage but has steadily increased to become a massively unfair advantage. The cost to U.S. producers increased to a whopping $327 billion in 2006.

 

In practical terms, this means that the German manufacturer of a car exported to the United States gets a rebate from the German government equal to the indirect taxes paid in Germany, a type of tax called the Value Added Tax (VAT). Since the VAT rate in Germany is 19 percent, the German carmaker gets a 19 percent tax rebate on every vehicle exported to the United States.

 

That's a significant subsidy to German auto manufacturers which enables them to sell cars in America for much less than they sell for in Germany. But what about American cars exported to Germany?

 

A U.S. manufacturer exporting an auto to Germany must pay the German government a VAT equivalent tax of 19 percent of the price of the car plus 19 percent of all the costs of transportation, insurance, docking and duties involved in getting the car to Germany. The U.S. company gets no credit for corporate taxes it pays in the United States.

 

$327 billion trading disadvantage with foreigners.......

http://www.eagleforum.org/column/2007/apr07/07-04-25.html

[NickF1011]

Ford & GM don't get a tax rebate for every car it sells in Germany, but the German government will give BMW a 19% tax rebate for every BMW it sells in the USA. So BMW can afford to under price it and still make a wopping great profit.

 

U.S. financial generosity to our allies after World War II included giving them special trade advantages to help them speed up their post-war recovery. We agreed that they could rebate to their producers any indirect taxes they paid on goods they exported to us, and they could also impose an equal charge on any U.S. products they imported.

 

Those nations recovered from World War II many years ago, but they still cling to what started out as a little advantage but has steadily increased to become a massively unfair advantage. The cost to U.S. producers increased to a whopping $327 billion in 2006.

 

In practical terms, this means that the German manufacturer of a car exported to the United States gets a rebate from the German government equal to the indirect taxes paid in Germany, a type of tax called the Value Added Tax (VAT). Since the VAT rate in Germany is 19 percent, the German carmaker gets a 19 percent tax rebate on every vehicle exported to the United States.

 

That's a significant subsidy to German auto manufacturers which enables them to sell cars in America for much less than they sell for in Germany. But what about American cars exported to Germany?

 

A U.S. manufacturer exporting an auto to Germany must pay the German government a VAT equivalent tax of 19 percent of the price of the car plus 19 percent of all the costs of transportation, insurance, docking and duties involved in getting the car to Germany. The U.S. company gets no credit for corporate taxes it pays in the United States.

 

$327 billion trading disadvantage with foreigners.......

http://www.eagleforum.org/column/2007/apr07/07-04-25.html

 

 

Enough of the "unfair competition" mantra. BMW isn't UNDERPRICING anything. If anything, the 3-series is quite a bit OVERPRICED for what you really get. But most of that extra price you are paying goes to image and nothing more.

 

Ford and GM are dropping the ball trying to build competitive global luxury vehicles, period. Don't blame legislation. Don't blame BMW. Don't blame the Germans. It's Ford's and GM's fault. Period.

[Michael Reynolds]

BMW underprices their cars????? :hysterical:

 

Yeah right! A Basic 335i w/o a single damn option costs more than the G35 Sport, with every conceivable option (sans active steering).

On a 3 everything is basically optional. A 3 equipped similarly to even my A4 is still considerably more, and about 11K more than the similarly equipped G35S in our driveway (and the G35 comes equipped with options BMW doesn't even offer). A 40K vehicle the size of a Ford Focus is hardly what I'd call underpriced.

 

Metallic paint (optional)

Leather (optional)

Need I go on........3s are by no means cheap. And as Nick mentioned good luck finding a stripper, they don't come that way from the factory. The ones on the road that you see equipped that way are special orders.

Edited September 21, 2007 by Michael Reynolds

[Ford Jellymoulds]

BMW underprices their cars????? :hysterical:

 

Yeah right! A Basic 335i w/o a single damn option costs more than the G35 Sport, with every conceivable option (sans active steering).

On a 3 everything is basically optional. A 3 equipped similarly to even my A4 is still considerably more, and about 11K more than the similarly equipped G35S in our driveway (and the G35 comes equipped with options BMW doesn't even offer). A 40K vehicle the size of a Ford Focus is hardly what I'd call underpriced.

 

Metallic paint (optional)

Leather (optional)

Need I go on........3s are by no means cheap. And as Nick mentioned good luck finding a stripper, they don't come that way from the factory. The ones on the road that you see equipped that way are special orders.

 

BMW underpriced

 

Just interested how much would you pay for a bog standard basic BMW 335i with not a single added extra?

In the UK they retail at $72,250 with not a single added extra fitted.

 

BMW 335i with no added extras

http://www.whatcar.co.uk/car-review-equipm...10&ED=52647

Edited September 21, 2007 by Ford Jellymoulds