SAN FRANCISCO -- A year ago, the industry crossed its fingers and put its faith in 0 percent financing and hot-selling trucks. This year, to keep sales momentum, the industry is counting on the U.S. Air Force.
"Whatever happens," said Tom Purves, CEO of BMW of North America, "we're assuming it will be over quickly. We're counting on that."
So is the rest of the industry, judging from the buzz at the National Automobile Dealers Association convention. In between the meetings on franchise rules and service department profits, retailers and factory executives agreed: A short war with Iraq is inevitable. Sales nationwide might hit the skids and the economy might stumble. But then it will be over and the party will resume.
That was the economic forecast presented by Van Bussmann, chief economist at J.D. Power and Associates at Power's International Automotive Roundtable. Talking to dealers and others, Bussmann discounted any severe impact, assuring the audience that whatever sales damage is done in the first half of the year would be undone in the second half.
"We've already built that into our forecast," Bussmann said of the potential military action. Given the U.S. ability to execute a hard-hitting, fast air war, he pegged 16.4 million as a 2003 sales forecast, expecting a 400,000-unit sales dip from 2002.
A quick engagement with minimal impact was not just a forecast but a rallying cry as news of sagging January sales filtered through the convention. The keynote speaker, former New York City Mayor Rudy Giuliani, even appealed to dealers to help maintain the nation's morale as the war unfolds by selling more cars and trucks.
"With the strong possibility of war with Iraq, we need to keep our spirit up," Giuliani said. "We're right about freedom - economic freedom, religious freedom - and our enemies are wrong. We're going to prevail."
Many expressed resignation over the looming conflict, saying there is little they can do but respond to events as they unfold.
Ben Hollingsworth, chairman of Group 1 Automotive Inc. in Houston, said the company has trimmed inventory, advertising and even staff - not because of the war but in preparation for a smaller market.
"I don't think you can budget for war. It is not one of the things we can control," Hollingsworth said. "We think there might be a little decline. There is not that much you can do except watch your inventory."
The key problem will be finding consumers with enough confidence to turn off their TVs and go to showrooms.
"You have the CNN factor," agreed Ken Gillman, CEO of Asbury Automotive Group of Stamford, Conn. "Any event that captures the public's imagination will reduce traffic. How quickly will that rebound? If it is a short war, you won't notice it. If it is longer, it's anybody's guess."
Dub Herring Jr., president of Dub Herring Ford-Lincoln-Mercury and Dub Herring Chrysler-Dodge-Jeep in Picayune, Miss., blamed the recent decline in his floor traffic on pre-war stress.
"This war thing is hanging over our head right now," he said. "People are uncertain about the future because of the impending war. We're used to seeing this. We have hurricanes down in south Mississippi. When they come up in the gulf and just sit there and spin, and we don't know what direction they're going, people quit buying anything.
"We're experiencing exactly the same thing with this war situation. They're just sitting there. Business has been slow, and I don't think people are going to move off of dead center until something happens."
Making matters worse, the market already is in decline. Last year's sales total of 16.8 million cars and trucks came in about 330,000 units below 2001 results. NADA chief economist Paul Taylor said such a decline is natural after a boom period such as 2000 and 2001.
Talk of war with Iraq is not helping. But he said consumer confidence is higher than it was during the Persian Gulf War, and consumer spending is stronger than a decade ago.
On the other hand, automakers were not planning so bullishly back in 1990 to introduce models as they are now. J.D. Power estimates the industry has 60 new products headed to market in the next five years; Nissan North America Inc. has four planned for introduction later this year alone.
Speaking at a luncheon during the convention, Jed Connelly, senior vice president for sales and marketing of Nissan North America Inc., said the company is expecting 100,000 additional sales this year -- war or no war. But he realizes world events and economic wild cards sometimes dictate a change of plans.
A long war with a troubling impact on consumer confidence would be a different story, Connelly and others say. But even then, the trick will be responding to the market, avoiding the trap of inventory gluts that require profit-eroding rebates.
"We can adjust production if necessary," Connelly said. "But that probably won't be necessary."