As we close in on the end of 2010, things are looking up for car manufacturers. This was underlined by General Motor’s recent IPO, which was a big success, raising just over $23 billion. Of this, $13.6 billions goes back to taxpayers, reducing the $49.5 billion that came from the Bush and Obama administrations, and reducing the government’s share in the company from 61% to 33%. If GM’s stock price can increase from its current $34 range to $53, taxpayers will be made whole. Whatever your political affiliation, objectively the government bailout of GM appears to have made fiscal sense; according to a study by the Center for Automotive Research, the $80 billion spent to save GM, Chrysler, GMAC, and Chrysler Financial not only saved 1.5 million jobs and $96.5 in personal income over two years, but was a net positive for the government. Personal income taxes, transfer payments, and Social Security payments, meant the feds came out ahead by $28.6 billion on the bailout so far. Not only were investors bullish on GM; the public appears to be back in the buying game as well. While overall sales for most all of 2010 are up (the ...

It seems strange: a slow economic recovery, decimated housing market, high unemployment—but record high car prices. The reason is simple, though: supply and demand. When the economy began to tank in 2008-9, new car sales dropped some 40%, and unprecedented amount in modern America. An immediate effect was that there where about 40% fewer trade-ins, meaning higher prices for used cars. Compounding this, many folk who could no longer afford new vehicles turned to used, keeping demand up (used car sales only dropped a few percentage points in 2008-9). Finally, the rental companies kept their cars a for an extra year or longer, drying up supplies of late-model ‘program cars’. During 2009 new car incentives reached all-time highs as manufacturers struggled to sell off bloated inventories. The standard used to measure these, days of supply, peaked at about 150 going into summer. But then came Cash for Clunkers, and by last August, supplies had hit the lowest numbers since recording of it began in the early ‘80s. Savvy car makers leveraged this huge bonanza, and—thanks to new labor agreements that let them run factories only as needed—began building to market demand. Experts consider a 60-day supply ...

A new client, referred by some happy customers, called me yesterday for help in finding a used vehicle. I asked him what he was looking for, but before he answered, he launched into a five minute diatribe about how he just ‘couldn’t believe’ that with the economy in such bad shape, used car and truck prices were so high. He went on to say that everything he thought was ‘fairly priced’ was junky; vehicles in nice condition appeared to be selling over bluebook prices. I tried not to chuckle; ironically I had just read another article from industry bible Automotive News that broke down exactly the factors causing this very situation—and which concluded that it will only get worse! Indeed, the biggest challenge for brokers such as myself right now is finding the cars, trucks, and SUVs our clients want. I can’t come close right now to meeting the needs of the folk I’m working with, such is the sorry state of used car inventories. The reason is pretty simple: supply and demand. Though new cars sales are way down (10.8-11.5 million is the projection for this year), used car numbers aren’t. But there are substantially smaller numbers ...

Double-dip recession? Economists say the chances are slim, despite the drag on the world’s recover caused by the Euro-crisis. But American consumers aren’t so sure; slowing job creating and stock market volatility have had quite an effect on sales in May and June. New car sales figures for June were up only 14% over a dismal 2009; this caused the seasonally adjusted annual sales rate (SAARs) to drop from May’s 11.8 million units to 11.1. Last year’s was only 10.4 million, a far cry from the 16-17 million new cars, trucks, and SUVs sold before the recession. Winners were Chrysler, up 35% from its 2009 B/K levels, and big pickups, which were up 26% over last year. China continues to go great guns, helping companies like GM remain profitable. But that doesn’t mean much for the average American; data from the independent Conference Board shows almost a 10-point drop in consumer confidence from May to June—though it’s still above winter’s levels. Other independent surveys show that three quarters of US consumers think we’re in for a double-dip recession. Statistically, most economic recoveries suffer a pause somewhere around 12 months in, which correlates with what people are feeling. Neither ...

Yesterday the Obama administration signed new regulations targeting the fuel efficiency of the cars, trucks, and SUVs we drive. Most of the details of the new deal were announced last September, but it’s worth revisiting them, and what they’ll mean to all of us. 2016 model cars will have to average 37.8mpg; pickups, SUVs, and minivans 28.8mpg. The weighted ‘fleet average’ for all vehicles will be 35.5mpg (according to the EPA, other agencies rank things differently, adding to the confusion and cost). That’s up from today’s 27.3mpg. Progress doesn’t come free, of course. Most of the ‘low hanging fruit’ has already been plucked to get us to where we are. Now, we’ll see more expensive engineering solutions to make new cars roughly 30% more efficient. Things like direct injection, 6-speed and twin-clutch gearboxes, active aerodynamics, hybrid and diesel engines, and more use of aluminum and other lightweight materials all have dollar values. The federal government says the average car will cost consumers $926 more; environmental groups concur. Most everyone in the car business and at independent consulting firms disputes this; their estimates range from $2000 to $8000 more depending on the vehicle, with an average of ...

Except for some Toyotas models, used vehicle prices continue to escalate, according to recent data from multiple sources. Whether we’re talking average retail transaction prices as reported by Edmonds, auction numbers, things continue to heat up. That’s due to shortages of desirable new cars, trucks, and crossovers, and the easing of credit restrictions from banks. ADESA, the country’s second-largest auction group, reported that the average price at their sales was up 3 percent in February over the month before; large SUVs were up 11 percent over a year earlier. And based on what I see, things only increase from there into spring, which is the beginning of peak season. An exception is Toyota’s cars that are affected by recalls and negative publicity, especially the Camry and Corolla. Compounding this is that many rental companies are turning in huge numbers of these models right now. But so far, Tacoma pickups and SUVs, and crossovers like the 4Runner, Highlander, and Sequoia are as strong as ever at retaining value.

Over the past week I’ve needed to order several vehicles for clients. That’s a bit unusual; during the past two decades, I’ve normally been able to get what someone wants either through one of the dealer fleet departments I work with on a regular basis, or by having them do a ‘dealer trade’ to get it—especially on American vehicles. But no more; I couldn’t find the right Chevy Traverse for one couple, nor a GMC Denali for another. I also ordered an Audi A4 and a Range Rover Sport. This reflects a change in the mentality of manufacturers, as they move from a ‘push’ strategy of shoving millions of unwanted cars, trucks, and SUVs down dealers’ throats (in order to keep factories running to cover fixed costs and meet union contract demands), and one reliant on people actually buying their vehicles. This began to be apparent last summer and fall, after the Cash for Clunkers program cleared out dealer inventories, and savvy new leadership at GM and Ford took advantage of the situation, keeping production as low as possible going forward. Chrysler’s B/K turmoil delayed them a bit, but by year’s end, everyone was aboard on the ‘pull’ ...

In the 1980s Audi was almost bankrupted by media frenzy about ‘sudden acceleration’. By the time 60 Minutes and other news outlets sheepishly admitted the truth—that the condition didn’t actually exist and that the fault was with the drivers, not the cars—it was almost too late. It took two decades for Audi’s sales to recover to pre-fiasco levels. Is history repeating? The current uproar really got started when an off-duty police officer, driving a loaned Lexus ES350, crashed, killing himself and the other three people on board. Minutes before this tragic event, someone in the car called 911, saying that the “accelerator is stuck…there’s no brake.” This struck me as very odd: there aren’t any production cars that have engines so powerful they can overcome standing on the brakes—especially a V6 sedan with 268hp. So when I got the new issue of Car and Driver I read with interest their take. They tested three different vehicles, including the ES350’s twin, the Camry, and found that, from 70mph, with the accelerator pinned, stopping distances increased 16 feet (which is still shorter than many other cars, trucks, or SUVs under normal conditions. They also confirmed that you ...

At the turn of the century the ‘Big 3’ were riding high: huge sales and even grosser profits drove Chrysler, Ford, and GM to think they could do no wrong—or that whatever sins they did commit would be washed away in a flood of black ink. Americans were in love with SUVs and trucks, and drunk on the cheap gasoline that propelled them. No one steering these corporate behemoths seemed to see the rocks ahead. Now referred to as the Detroit 3, they’ve watched their market share erode to only 44% of a much smaller market; foreign firms gobbled up an astonishing 21% over those years. Automotive News says the domestics sold 6.8 million fewer vehicles in 2009 than they did in 2000. The pain (and ineptitude) look even more obvious when you realize that the drop in the overall new car market between those two years was about 7 million vehicles, meaning that, basically, import brands stayed flat in a market down 40% while Detroit crashed and burned. I’ve seen this reflected in the brokering I do; there was a time when the inventory we stocked, or trades we kept, were split about 50/50 domestic to import. Now, ...

There were some fascination contrasts on display the first day at Detroit. It started with Ford; not only did they sweep the North American Car and Truck of the Year awards with the Fusion Hybrid and Transit Connect, but their unveiling of the new Focus was unmatched by any pomp and circumstance that followed. [caption id="attachment_942" align="alignleft" width="300" caption="A hatchback even Americans might like: the Focus"][/caption] [caption id="attachment_943" align="aligncenter" width="300" caption="Focus interior (we hope)"][/caption] [caption id="attachment_944" align="alignright" width="300" caption="Durn good looking for a Focus"][/caption] Here is a company that exudes confidence and chutzpah—no surprise with sales and market share up and a profitable quarter to end last year. And for the first time we Americans didn’t get the hand-me-down version of their C-segment offering. This new Focus looks terrific in both four- and five-door form, and its interior (if it’s close to that inside these preproduction units) is simply stupendous for a vehicle in this price range. Ford is ‘democraticizing’ high-tech with this car; whether it’s the second-gen Sync system or the intuitive touch-screen interface, or features like self-parking or the twin-clutch tranny, the Focus makes mainstream—and small—feel premium. In comparison, General Motor’s first two intros felt a bit lacking. ...