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DEALERS ENCOUNTER FEW POTHOLES EN ROUTE TO RECORD SALES

From the plate glass windows of Tunmore Oldsmobile in Buffalo, Anthony DiPasquale had a clear view of the millennium's best year for auto sales.

"General Motors . . . wanted to put some vehicles on the road," said DiPasquale, general manager of Tunmore. "We had a very good year compared to the last few."

The year 1999 was a clod-busting, roof-rattling record breaker for auto sales on the Niagara Frontier as well as nationally, according to industry surveys.

But while buyers appear poised to continue flooding showrooms in 2000, dealers say they see a continuing squeeze on profits and fierce competition for every dollar, as leasing programs reshape the market.

"It's got to end sometime -- but until then it's really the consumer who benefits," said Trey Barrett, marketing director for the Niagara Frontier Automobile Dealers Association.

Area dealers set a record of 67,304 new car sales in just the first 11 months of the year, with December sales still to go, according to the NFADA's survey. Dealers ended the year with an estimated 72,500 sales, a 23 percent leap from the previous year. December sales figures will be complete later this month.

"People have more money," said Richard K. Welte, president of the NFADA. "Even though we're in an economically depressed area, people have made owning a car a priority."

For Gary Pontiac in Buffalo, the ingredients for a good sales year include high consumer confidence, low-cost lease programs -- and no strike at General Motors Corp.

"We'll come out better than last year," Peter Paganelli, general manager of the Buffalo dealership, said of 1999 vs. 1998. "The manufacturer's lease programs are strong."

At Tunmore Oldsmobile, leases "are all that's driving the market right now," DiPasquale said as the record year ended. Monthly payments for the entry Alero have been at $219 for much of the past year, while the Bravada leased for under $300 a month.

"That's a $32,000 sport utility -- that's incredible," he said.

Lease programs have been the key for moving many vehicles, Barrett said, with manufacturers vying to post the lowest per-month prices to attract buyers.

In an effort to boost market share, GM ratcheted up its incentives during the year's final months, prompting similar moves from some competitors. The incentives perked up a usually slow winter season and turned what would've been a record year anyway into a runaway, analysts said.

Nationally, sales were set to reach 17 million cars and light trucks, surpassing the previous record set in 1986 by almost 1 million units.

"That's pretty phenomenal, coming on the back of a super year (in 1998)," said Paul Taylor, chief economist of the National Automobile Dealers Association in McLean, Va. Franchised dealers sold 15.5 million cars and trucks in 1998, up 3 percent.

Interest rate hikes are likely this year to keep inflation in check, putting a damper on sales, Taylor said. But, barring a deep and prolonged stock market slump, autos are on track to continue selling at high levels, he predicted.

Low interest rates embedded in automakers' lease programs have been the fuel behind the sales boom, nationally and locally, dealers said.

But some dealers see a downside, as leases reduce the choice of a vehicle down to a single figure -- the monthly payment.

"The problem with a lease-driven market is there's no brand loyalty," DiPasquale said. "If someone comes off an Olds at $219 and can get a Nissan for the same price, they'll do it."

The key, he said, will be whether the manufacturers have as attractive a lease program in three years, to recapture today's customers.

On the Niagara Frontier, the beneficiaries of the sales surge have included higher-end and luxury models, which are seeing larger percentage increases than mass-market vehicles.

Porsche sales, for example, increased to 72 units, from 44 the previous year, NFADA said.

"The most pleasant surprise in the past year, and what analysts predict for next year is a very strong luxury market," said Tom Culligan, owner of Culligan AutoPlace in Clarence.

However, about one-third of Culligan's Porsche sales go to buyers from outside the region.

Whether the boom times for luxury models can continue "is going to depend on whether the Buffalo market can get close to what's happening nationally," he said.

A sales downturn could rekindle the consolidation of dealerships by automakers, an issue that was put on the back burner during 1999. Two Oldsmobile dealerships were subtracted from the market last year, as Streng Oldsmobile was bought-out by GM and Holiday Oldsmobile in Clarence sold its Olds and Jeep-Eagle franchises to other area dealers.

Automakers stepped back from plans to take greater control of their own sales by owning dealerships themselves. GM announced it would scale back its plans for a company store, while Ford announced it wasn't trying to replace independent dealers with its Ford Network.

"One thing history suggests is that manufacturers are not particularly skilled in the retail end of the automobile business," the NADA's Taylor said. Ford gave up its factory-door sales program decades ago, transferring the business to a Detroit dealership that's still operating, he said.

The automakers' step back is a mixed blessing for area dealers, who fear competition from the factory but acknowledge that there are too many independent outlets for some cars.

"All of us wish there were fewer (dealers,)" said Paganelli, who faces competition from eight other Pontiac stores.

Consolidation will probably happen at the top, Welte said, as automakers swallow each other in the manner of the Daimler-Chrylser merger last year. Both GM and Ford are vying for Korean automaker Daewoo, he said.

Internet sales methods will likely also continue to heighten competition, as auction-style sites put dealers in head-to-head contest for buyers' business. InvoiceDealers.com, which lets dealerships post their best price on a given model, is selling 20 cars a day from its network of 1,100 participating dealers, Chief Operating Officer Greg Baszucki said. Unlike larger sites like AutoByTel, InvoiceDealers works with more than one dealer of a particular make in a geographic region.

"Consumers use the site instead of making 3 or 4 trips" to area dealers, he said.

Dealerships are responding to the pressures by selling more cars with fewer people, Taylor said. Nationwide, dealers employed 1,300 fewer people in 1998 than '97, while sales rose 11 percent. He expects that employment will be found to have continued declining in '99 while sales increased further.

"That's better management and increased productivity," he said. While the Internet is putting pressure on profit margins for sales, he said, "there's no such thing as virtual service."

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