COMMENT: Of toothpaste tubes and the madness of daily routines

COMMENT
Franz W. Rother is Editor-in-Chief of Automobilwoche

The manager of a large multi-brand showroom in the Ruhr region in western Germany recently told me that dealing with Ferrari sports cars is the only thing that's still really fun these days.

Ferrari's model range remains manageable, the brand's appeal is enormous and the number of available cars is very limited. Therefore, discounts never come up when a sale is being discussed. Customers are only interested in the shortest-possible delivery time.

This dealer sees what is happening at other manufacturers as absolute madness. Quote: "At the end of 2004, some sales people simply went bonkers."

Even BMW resorted to day registrations to improve the annual result and push sales figures during the final days of 2004, this dealer says. Other manufacturers, he says, offered different sales promotions and some created new kinds of incentives to mobilize consumers.

The "end-of-the-year rally" was worth it, as we now know. Sales were up 21.5 percent in December, pushing overall 2004 sales in Germany.

However, the delirious frenzy is now followed by depression. Many of the cars that have been reported sold by manufacturers are still resting in dealers' backyards. And the private car purchases that were a result of all the special offers will soon be missed in the sales figures of the 2005 "car spring."

Bernd Gottschalk, president of the German Automobile Association, the VDA, believes that daily routine will soon catch up with the industry. And, no question about it, it will lead to new incentives for both dealers and consumers.

Discounts have long been common practice within the car trade. Former BMW and Ford executive Wolfgang Reitzle once compared them to toothpaste. The amount squeezed out of a tube can never be put back in again. All manufacturers -- with the exception of Ferrari and some other exotic brands -- had to squeeze their tubes a lot.

The reason is simple. The German car market is saturated. Three million new cars a year is the most that can be sold here. Anything above that number has to be forced onto the market, either at discounts or increasingly as lease cars.

Because conditions within the fleet business nowadays lack all common sense, the trade sometimes is confronted with absurd situations. After a period of two years, residual values of returned leased cars are higher than the discounted sales prices of comparable new cars. The trade has to bear the resulting losses.

There is only one way out of this madness: Get rid of overcapacity within the car industry. New and more attractive models alone will not do the trick. And neither will changes to dealer locations in Germany.

Automakers must do some work internally. At Opel, this was recognized a long time ago. It has already been done at Ford. And I predict that soon further tough measures will also be taken at Volkswagen and DaimlerChrysler.

The automotive year 2005 promises to be full of suspense, not only because of the Frankfurt IAA later this year.

Automobilwoche's editorial staff is increasing personnel and the newspaper is also fine-tuning its content as well as its appearance.

A separate "car manufacturers" section is being introduced and coverage of car retailing and the service sector will be stepped up. It is in these areas, after all, where it is immediately clear who understands his business.

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