Why this is the year of the dealer

A two-and-a-half-hour parade of forecasters and economists never uttered the word “dealer,” but what they described is a big year for auto retailers.

Don't blame the speakers at this week's Society of Automotive Analysts conference in Detroit. Their clients or employers build vehicles, and when they look at the industry they see metal benders.

And things are indeed looking up for auto manufacturers. Sales bouncing back from the pit of despair. First quarter production jumping 15 percent or so. Profitability returning. Forecasters see the recovery accelerating.

But conditions may be even better for dealers, listening to the SAA seers. Like automakers and suppliers, surviving dealers are lean and mean, earning a buck despite very low volume. But while not exactly running no-capital maid services businesses, dealers don't have billions in underused tooling sitting around either.

What dealers need is improving: credit availability, consumer demand, consumer confidence. Americans are paying down their debts, says William Strauss, chief economist at the Federal Reserve of Chicago. And what consumers are driving is getting older and older.

Dealers are certainly ready for some good news. Yes, U.S. auto sales rose 11 percent last year. But the first eight months, fleet sales carried the load and retail sales barely budged. So a big rally for retail sales since September is cheering.

Now, says Rebecca Lindland, senior analyst for IHS Automotive, “Retail is leading the upturn, transaction prices are up and the mix is richer.”

Jeff Schuster, head auto forecaster for J.D. Power, sees total 2011 U.S. sales rising another 1.2 million. But this year, all that growth will be retail, and if fleet sales rise, that would be on top, not a retail replacement.

Ford Chief Economist Ellen Hughes-Cromwick sees U.S. economic growth reaching 4 percent this year, likely outpacing the rest of the world.

Most dealers I talk to say consumers just need to feel a bit better to take the plunge and buy a new ride.

For them, the Fed's Strauss has some cheer. He knows why five straight quarters of growth feel so lousy.

It's because 62 percent of recent economist-measured growth has been manufacturers rebuilding inventories rather than selling them.

And that will translate into completed sales this year.

Strauss said 2011 “will be above trend, but with actual sales driving growth, it certainly will feel a lot better.”

And 2012? Better yet.

ATTENTION COMMENTERS: Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Email Newsletters
  • General newsletters
  • (Weekdays)
  • (Mondays)
  • (As needed)
  • Video newscasts
  • (Weekdays)
  • (Weekdays)
  • (Saturdays)
  • Special interest newsletters
  • (Thursdays)
  • (Tuesdays)
  • (Monthly)
  • (Monthly)
  • (Wednesdays)
  • (Bimonthly)
  • Special reports
  • (As needed)
  • (As needed)
  • Communication preferences
  • You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.