automotive industry idling, but ready to roll, The

Motor,  Sep 2002  by Nash, Tom

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A look back on the events of September 11, 2001, and how the automobile industry has been affected, from manufacturing and sales to the aftermarket repair trade.

America came to a standstill on that fateful morning a year ago. We stopped what we were doing and became glued to our TV sets. In the East, people stopped their work; daily responsibilities pretty much became secondary. In the Midwest, Americans arose to the terrible news and canceled plans for the day. On the West Coast, citizens were jolted awake with phone calls from friends and family alerting them to the tragedy.

The transportation industry shut down, too. All air traffic was grounded, trains screeched to a halt and buses rolled into the nearest station. Automobile traffic slowed to a trickle, but remained the one method of transportation we had at our command. The very distinction that makes America unique-our unfettered mobility across this vast country-had temporarily been suspended.

Everyone in the automobile industry and the aftermarket repair trade wondered bow it would affect us. What would the effects be, both immediate and long-term? The answers lie not wholly in the aftermath of the tragedy, but in the stability of the national economy, which terrorists hoped to damage by attacking a symbol of our national economy, the World Trade Center.

One year later, even as the stock market and economy stumble, there is some good news, or at least reason to hope, for the service and repair industry.

The automobile industry certainly was impacted by the shocking events of September 11th. As a prominent part of the national economy, it was affected by the fluctuations of the stock market and the economy as a whole. The industry is still feeling the effects.

We take this opportunity to recall the last year and examine how the events of September 11th shaped the current condition of automobile industry-the automakers and new-car and used-car sales. We'll also look at the effects on the transportation industry as a whole and how it relates to automotive repair and service. Lastly, we'll revisit the hardest-hit cities, New York and Washington D.C., and report on the problems they have encountered.

The Vehicle Manufacturers

In the days immediately following September 11th, buying a new vehicle was a low priority for many Americans. Most were waiting to see how the government would react and what the economic impact would be.

Automobile companies weren't initially affected, other than suffering the loss of a percentage of sales, and seemed to recover by the end of the year. Likewise, OE parts suppliers felt little impact.

On the Now-Car Sales Front

One key indicator of economic stability used by economists has always been newcar sales. In the service and repair industry, this figure is the gauge of how many vehicles are going to need repair in the future. True, older cars need more repair and maintenance work, but new vehicles are tomorrow's business for repair shops.

On the new-car sales front, the National Automobile Dealers Association (NADA) offers the aftermarket a reason to be optimistic for the future. NADA reported that franchised new-car dealers completed their second best year in history in 2001, selling more than 17.1 million units, a performance bested only by sales in 2000, which set an all-time record at 17.35 million units of light vehicles sold. Even a slight dip in the fourth quarter, fueled by the tragic events of last September and the uncertainty that lingered for weeks, couldn't abate the sale of new vehicles-a healthy sign, for sure.

In 2002, car and light truck sales continue to roll along at a healthy pace, despite economic uncertainty. Trends show that year-end sales should top the 16 million mark. Positive signs in a gradually recovering economy promise good things for the rest of 2002, according to NADA Chief Economist Paul Taylor.

"With job creation starting to rise, the market is broadening for auto sales," he said. "In addition, concerns about disproportionate hikes in interest rates by the Federal Reserve Board are starting to fade-and that's good news for car shoppers and our industry."

Fuel efficiency costs, environmental concerns and the desire to lessen our dependency on foreign oil may be having an impact on the buying public.

"Gasoline prices have already risen 23%," noted Taylor, "and may be up by 30% in the coming months. When fuel prices increased by 30% in 1997, more car buyers opted for four-cylinder vehicles. We are likely to see the same trend in coming months, and CUVs (crossover utility vehicles) and hybrid vehicles will become even more popular."

Auto sales have held up surprisingly well through July; says a Reuters survey. Incentives offered by automakers, ranging from Mitsubishi's zero-percent loans with no payments for the first year to $7000 rebates on GM's Cadillac Eldorado and Ford's Lincoln Blackwood and Town Car, have helped boost the market.

DaimlerChrysler's decision to shift its temporary sales incentive of a 7year/100,000-mile power-train warranty into permanent status has borne fruit on its sales floors. Suzuki recently followed suit with a 7/100 plan of its own.