Postscript: You can't buy a car while watching the news

They call it 'the CNN Effect.' During the Persian Gulf war in 1991, car sales in the United States plunged while citizens watched around-the-clock coverage of the fighting. History repeated itself on September 11 when three jets hit the World Trade Center and Pentagon.

According to consumer research firm J.D. Power and Associates, sales of new cars and trucks in the United States fell 26 percent on September 11, compared with the same day a year earlier. Sales stayed low through the end of the week, leading J.D. Power's Van Bussmann - Chrysler Corp.'s former economist - to predict a mild U.S. recession. Bussmann says he expects U.S. sales of light vehicles to stabilize at an annualized rate of 16 million units.

That would be a sharp drop from last year's record 17.4 million units. But by historic standards it would be a healthy result. But then Bussmann added a disclaimer: 'Unless we become involved in an extended land war, the U.S. economy is likely to be expanding once again by the first quarter of 2002.'

NO PREDICTIONS

An extended land war... That ominous phrase underlines the fundamental shortcoming of any economic prediction. Economists are not fortunetellers. They cannot foretell an oil embargo, or the number of Marine casualties during an attack on the Taliban stronghold of Kandahar. They cannot predict an attack on the Sears Tower in Chicago, or the assassination of a political leader.

Veteran auto executives already have learned this lesson. During a dinner party in Frankfurt on September 10 - the night before the tragedy - I encountered General Motors executive Fritz Henderson. Over the past year, Henderson has run GM operations in South America, Africa and the Middle East. And for three years before that, he ran GM's Brazilian operations.

Henderson has made his peace with uncertainty. During our chat, he noted that Brazil had gone through eight distinct economic downturns and subsequent upturns during his involvement with that region. 'My people are unquestioned experts on volatility,' Henderson cheerfully noted.

In Brazil, successful auto executives know how to improvise. They have learned to deal with currency fluctuations, inflation, electricity shortages and labor strikes.

Living differently

Now, U.S. executives are learning to live with uncertainty. Following the attack on the World Trade Center, the temporary closure of the Canadian border prevented suppliers from delivering parts to U.S. assembly plants. Parts shortages forced General Motors, DaimlerChrysler and Ford Motor Co. to temporarily shut down assembly plants.

A week after the attack, transportation bottlenecks across the Canadian border appeared to be easing. But travel restrictions are likely to endure. The Chrysler group allowed only essential travel. Ford permitted air travel to deal with 'critical business needs and emergencies,' and General Motors banned all international travel.

WHEN TO ADVERTISE?

While auto executives wrestled with travel restrictions, marketers canceled their advertising to avoid appearing insensitive. Nissan yanked a TV commercial that featured the Maxima driving through the desert, pursued by the Grim Reaper. Meanwhile, Ford's Lincoln luxury division canceled a commercial for the LS sedan that featured scenes of Manhattan.

Even after advertising resumes, automakers can't be sure how the public will react. Will patriotic consumers move to American brands? One day after the attack, Fred Schwab - president of Porsche Cars North America - bluntly addressed this question. 'If yesterday morning it was cool to buy a Porsche, by yesterday evening it was not cool to buy a Porsche,' he said.

Although I don't claim to be a fortune teller, I will make one prediction: We have not seen the last of the 'CNN Effect.'

You can reach Richard Feast at autonews@crain.com

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