Lincoln, Cadillac woo buyers with extras

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Auto dealers vie to distinguish their brands in a soft market
Robert Snell / The Detroit News

General Motors and Ford have dropped their fur-lined gloves and are engaging in one-upmanship to distinguish their luxury brands in a competitive segment of the market.

Ford Motor Co.'s Lincoln and General Motors Co.'s Cadillac are dangling free maintenance deals, a perk long offered by rival import BMW, but dropped by luxury automakers Lexus, Audi and Mercedes-Benz in recent years amid high costs.

The goal is not to boost sales during the short term in a soft luxury market, but to distinguish the premium domestic brands from their foreign rivals, raise brand awareness for Lincoln and Cadillac, and cultivate long-term repeat customers.

Their efforts come as the luxury car market has posted single-digit percentage gains and luxury sport utility sales have increased 30.7 percent in the first half of the year, despite a weak economy. Other vehicle segments, such as pickups and sport utility/crossovers, have notched double-digit increases this year, while the overall market has climbed 16.7 percent.

The domestic brand incentives sparked mixed reactions from dealers and industry analysts, who said free maintenance perks could help them compete with foreign rivals, but likely won't boost sales in the short term.

"It's a customer comfort sort of thing and a little bit of exclusivity," said auto analyst Joe Phillippi of AutoTrends Consulting in Short Hills, N.J. "You're not going to get this at a Chevy or Ford dealership. Someone's not going to buy a Cadillac or Lincoln because they think the free maintenance deal is better than the other guy's. But it's going to make them happy while owning the car."

While Cadillac and Lincoln lag Lexus, BMW and Mercedes in sales, the domestic brands were up 33.3 percent and 7.5 percent, respectively, through June, compared with the 9.4 percent increase in the overall luxury segment.

Dealers encouraged
Some dealers are encouraged and hope the perks trigger an increase in showroom traffic at a time when retail sales remain sluggish amid a weaker-than-expected recovery in the auto industry.

"It will make it a little easier to get customers in the door," said Justin Osen, a salesman at Don Gooley Cadillac in St. Clair Shores.

Last month, Lincoln unveiled a deal offering free scheduled maintenance for three years or 45,000 miles for those who buy or lease a new 2010 or 2011 Lincoln. Cadillac followed three days later, upping the deal to four years or 50,000 miles on 2011 models.

The Lincoln program, which expires Sept. 7, covers oil changes, tire rotations, routine inspections, engine belts, hoses and replacement of wiper blades and brake linings. The Cadillac offer will be standard on 2011 models.

Chrysler Group LLC doesn't have any luxury brands and declined to comment whether it has any similar perks for its lineup.

The Cadillac and Lincoln offers aren't the right tool to lure buyers or close sales, said Lincoln dealer Tammy Darvish, vice president of DARCARS Automotive Group in Silver Spring, Md.

"I don't think it will really have a lot of impact," she said. "People don't come in and buy a car because of free maintenance."

But the offer could convince a customer to stay loyal to a particular dealership and help the dealer build a relationship with the customer, Darvish said.

"I prefer to go into a relationship with longevity at the heart of it," she said. "Not just a quick 'come in and get a free oil change,' and we'll never see you again."

The timing of the offers coincides with automakers clearing out 2010 models and introducing new models. For Cadillac, the first vehicle eligible under the deal is the CTS Coupe, which reaches showrooms later this summer.

"It's a good time to offer these types of deals. They're being competitive at a time when people are luxury shopping," said Jessica Caldwell, a senior analyst at Edmunds.com.

"They need to prove themselves and offer a competitive product before they can compete with BMW or Mercedes," she added. "Right now, it's crucial for them to step up their game and break into the luxury market strongly."

Caldwell is encouraged that the luxury segment hasn't tanked along with the economy. Sales should improve later this summer and early fall as 2010 models are liquidated and 2011 models introduced, she said.

A mixed reception
The offers' varying lengths and coverage met with mixed reception among some analysts, however, who say Cadillac, in particular, didn't go far enough.

James Bell, executive market analyst for Kelley Blue Book, faulted Cadillac for failing to cover wear-and-tear items such as windshield wipers and brakes.

Cadillac's deal covers scheduled oil changes, tire rotations, engine and cabin air filters, and a multipoint vehicle inspection.

The offers should generate additional warranty and service profits for dealerships coping with sluggish retail sales, Bell said.

In addition, they should help ensure that owners take better care of leased and low-mileage vehicles, which ultimately will be resold by those same dealers, he said.

"Our bet says these programs become standard offerings from both U.S. manufacturers in the next year," Bell said.

The offers are not particularly novel -- many European brands have offered such perks for years -- but they do signal bids by Ford and GM to more aggressively pursue luxury segment leaders Mercedes and Lexus.

"The program is designed to raise satisfaction for owners by ensuring access to expert service," said Kurt McNeil, vice president of Cadillac sales and service. "It should lead to higher loyalty rates for dealers by establishing them as a valued resource for our customers."

The efforts also could increase margins for sales staff and ease the stress of buyers seeking freebies.

Each time Osen sells a Cadillac SRX, for example, his cut is $280 before taxes. But that amount shrinks after taxes and the $80 oil change that he routinely offers free to his customers.

The incentive also could help ensure leased vehicles are returned in better condition and easier to sell, Osen said.

"If the car gets fixed for free, what do they care?" Osen said. "I can't tell you how many lease turn-ins have the light on saying it needs an oil change."

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GMC Granite, Audi A8 grab EyesOn Design Awards

Posted by David Phillips on Tue, Jan 12, 2010 at 5:05 PM
The GMC Granite concept and the Audi A8 luxury sedan were awarded top honors today at the 2010 EyesOn Design Awards at the North American International Auto Show. The awards are judged by top automotive designers and academics from transportation design programs. In the concept vehicle category, the GMC Granite urban utility vehicle received top honors. The GMC Granite combines functionality with what GM calls an " urban-industrial design aesthetic." It is the smallest GMC ever, too.
The other concept vehicle finalists were the Nissan Mixim, Revenge Verde Supercar, and the Audi eTron concept.
Among production vehicles, the 2011 Audi A8 won the "Award for Design Excellence" It is the fourth generation of Audi's flagship car. The other finalists for production vehicles were the Bentley Muslanne, Fiat 500, Ford Focus, and Lincoln MKX.
The lead judges this year were Willie G. Davidson, chief styling officer for Harley-Davidson; Tom Matano, executive director of industrial design at the Academy of Art University; and Jack Telnack, retired head of global design for Ford Motor Co.
EyesOn Design at the North American International Auto Show is sponsored by the Detroit Institute of Ophthalmology. The DIO is a not-for-profit that aids the visually impaired and facilitates research related to the eye.

For car buyers, lending market sees signs of thaw

For car buyers, four words mean the difference between going home in a new sedan or their old clunker: Your loan is approved.

They are being uttered more often these days, spurred by a trillion-dollar government program that provides guarantees when those loans are sold to investors. That is helping banks, credit unions and auto finance companies make auto loans at a quickening pace. And consumers are paying less to borrow. Interest rates have been at record lows since last December.

It's bit of good news for the auto industry in the U.S., where 2009 sales are expected to hit a 30-year low of around 10 million when figures are announced Tuesday. Partly because of loosening credit, industry analysts expect more than 1 million cars and light trucks to be sold in December, the best monthly performance since Cash for Clunkers in August.

Financial firms wrote 5.5 percent more car loans in the third quarter compared with the prior three months, Experian Automotive says. Fourth-quarter figures aren't yet available, but Jesse Toprak, vice president of the auto pricing tracker TrueCar Inc., says December saw an uptick in auto loan approvals for consumers with average or above-average credit as auto finance companies tried to clear out inventory.

Paul Taylor, chief economist for the National Auto Dealers Association, said used-car prices also have stabilized due to limited supply, making used-car loans more attractive to banks.

Still, Toprak said it could take another year or even longer for financial firms to trust consumers enough to return to normal levels for auto lending. It's also far from the freewheeling days of the credit boom. Third-quarter auto lending was down 30 percent from the same period in 2006, a year when U.S. car and light truck sales reached 16.5 million.

In the meantime, only those with good credit need apply.

A top-tier borrower — someone with a credit score between 720 and 850 — can get a 36-month auto loan with an average monthly rate of 5.74 percent, down from 6.65 percent a year ago, according to Informa Research Services, a financial research firm headquartered in Calabasas, Calif. On a $20,000 car loan, that's a savings of nearly $300 over three years.

But the cost of borrowing has risen for people in the bottom tier. A person with a score of 500 to 589 has seen the average rate climb to 18.56 percent from 16.47 percent a year ago. That translates to an extra $751.68 over 3 years. Banks are still nervous about loaning money to risky borrowers given high rates of unemployment, foreclosures and late payments since the financial crisis began.

"We used to have a subprime auto lending industry," says Dan Alpert, managing partner at Westwood Capital, an investment bank involved in the securitization business. "We don't have that anymore."

Although demand for autos has picked up from depths seen at the start of 2009, the lending machine really got moving thanks in large part to grease from the government's TALF — or Term Asset Backed Loan Facility — program. The program began last March and allows investors to borrow money from the Federal Reserve to buy the loans off lenders' books. This raises money and makes room for financial firms to write more loans.

There is evidence it's working. Financial institutions raised more than $19 billion by selling securities made of bundled auto loans in the third quarter last year. That's up nearly 60 percent from the second quarter and more than sixfold from the same period in 2008, according to the Securities Industry & Financial Markets Association.

TALF is scheduled to end in March 2010. Whether the market for securitized loans can stand on its own at that point depends on the state of the economy, lending experts say.

The concerns are similar to those in the housing market, where tax credits for first-time home buyers have helped prop up demand. But those credits expire April 30. And loan activity, in general, has been weak. According to the Federal Reserve, loans by the nation's 8,000 banks have fallen 8 percent to $6.7 trillion in the past year, and some analysts expect them to keep falling at least through next year.

But there are good signs. The proportion of loans — auto and other — requiring TALF support has declined steadily over the past several months and should continue to fall early this year as the market for securitized loans continues to improve, says Tom Deutsch, deputy executive director of the American Securitization Forum, an industry group that represents those who turn debt into bonds.

"It should be relatively easy to wean off TALF," he says.

In the meantime, the easier lending market has helped car buyers like Marissa Corbitt, who last month bought her first-ever car with a loan from Nissan's financing arm, NMAC.

Corbitt, a 24-year-old accountant from Chattanooga, Tenn., was able to negotiate the cost of her 2010 Rogue down several thousand dollars to about $20,500 after some incentives. She said she was then pleasantly surprised by the interest rate NMAC offered her for the crossover.

"Nissan was offering a 2.9 percent APR, so I got that," said Corbitt, whose top-tier credit score helped her case. "It's a good interest rate."

George Pipas, Ford Motor Co.'s top U.S. sales analyst, says the industry appears to have passed through its lowest point and is trending toward a slow recovery.

"The situation is still fragile," Pipas said. "You can't walk away from concerns about employment and income."

By DAN STRUMPF and DEE-ANN DURBIN
AP Auto Writer

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With Senate Vote, Congress Refuels 'Clunkers' Program

By Dana Hedgpeth and Perry Bacon Jr.Washington Post Staff Writers Friday, August 7, 2009


The government's "Cash for Clunkers" program won a much-anticipated extension Thursday night as the Senate voted to give an additional $2 billion in funding to the popular initiative aimed at boosting stagnant auto sales.


The 60 to 37 vote follows House approval of a similar measure last week and appears to save the government plan from an unexpected early shutdown. The White House supports extending the program, and the new funds are predicted to last until Labor Day, Transportation Department officials have said.


"Cash for Clunkers" appeared to be in jeopardy last week just days after its official launch. Congress had appropriated $1 billion for the program, which offers vouchers worth up to $4,500 for drivers trading in their gas guzzlers for more fuel-efficient vehicles. But the program drew so much interest that it almost ran out of funds well before its expected expiration in November.

Transportation officials warned lawmakers late last week that the plan faced suspension.
In a statement Thursday night, President Obama praised the swift passage of the Senate bill, calling the program "a proven success." Obama could sign the bill as early as Friday.


The Senate vote came after lawmakers considered and rejected several amendments to the legislation, including one from Sen. Tom Coburn (R-Okla.) that would have allowed trade-ins to be donated to charity. The current bill requires that the cars be junked.


"Today's vote is a victory for families and businesses all across the nation," Sen. Debbie Stabenow (D-Mich.) said after the vote.


Seven of 40 Republicans crossed party lines to support the measure, while four Democrats voted against it. Auto dealers welcomed the prospect of additional money for the program, which has helped draw customers in droves.


"With the additional $2 billion, even more 'clunkers' will be taken off the road and replaced with more fuel-efficient vehicles," John McEleney, chairman of the National Automobile Dealers Association, said in a statement Thursday night. "Extending the 'clunkers' program benefits the environment and the economy. It's the best kind of stimulus."


Dealerships said they continued to see interest as the program ends its second week.AutoNation, one of the largest vehicle retailers in the country, said consumer traffic was up 35 percent over this time last year at its 225 dealerships in 15 states.


Since the program started, AutoNation has taken in 3,500 clunkers. To keep up with anticipated demand from the program, company executives ordered 45 percent more vehicles in the second quarter from major automakers, including Honda, Ford and Toyota.


"Cash for Clunkers is a huge success," said Marc Cannon, a senior vice president at AutoNation. "It is doing everything they said it would do: creating dealer traffic, clearing out inventory and getting more fuel-efficient cars on the road. This is what the American consumer and psyche needed."

On Wednesday, the Transportation Department published new figures showing that a total of 184,304 trades had consumed $775.2 million of the $1 billion originally appropriated. The Toyota Corolla is the best-selling new car under the clunker program. After the Corolla, the top sellers are the Ford Focus, Honda Civic and Toyota's Prius and Camry.


Of the new vehicles not manufactured by the Big Three, according to a preliminary analysis by the Transportation Department, "well over half" were made in United States. Of the trade-ins, more than 80 percent were trucks, the government said, with Ford's Explorer and F-150 pickup topping the list. The average miles per gallon of the new vehicles is 25.3, compared with the trade-ins that averaged 15.8 miles per gallon.


The program, however, has been plagued by troubles. Consumers were confused as to which cars qualified. Dealers said they have spent hours trying to log on to the government's Web sites to put in paperwork on the deals they completed. Some dealers said they ran into problems collecting government payments.


Transportation officials say they have resolved those issues by adding computer capacity and beefing up contracted staff to help run the program. Some auto analysts and economists are skeptical about the program's long-term impact.


"The Cash for Clunkers at this point is like one of those energy drinks," said Anthony Sabino, a professor of law and business at St. John's University in New York. "It gives you a short-term boost, then you crash and you fall back into the doldrums."

For your best Cash for Clunker deal, visit www.saturnofasheville.com, www.saturnofgreenvillesc.com, or www.saturnofsparatanburg.com for the fuel efficient cars from Saturn with a 5 year 100,000 mile powertrain warranty.

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• Congress OKs $2B refill of 'cash for clunkers' (huffingtonpost.com)

'Clunker' Rebates Stir Car Buyers

By ALEX P. KELLOGG and JOSH MITCHELL

The first weekend of "cash for clunkers" rebates boosted new-vehicle sales, despite minor snags and worries the program might not have a long-lasting effect.

On Monday, Daryl Little turned in his dusty 1995 Chevrolet Silverado pickup truck with 362,000 miles at Cook Chevrolet Pontiac Buick in Vassar, Mich., and drove off with a new, 2009 Silverado that qualified for the rebates because it gets much better gas mileage than his old one.

Mr. Little said he would have been lucky to get $1,200 for his old truck and wouldn't have had the money to buy the new one without the $4,500 clunker rebate. "I thought I'll never get a better deal," the construction-company manager said.

A sign advertises the government's cash-for-clunkers sales incentive at Tropical Chrysler Jeep in Miami Shores, Fla. Dealers reported strong sales over the weekend by buyers seeking the up to $4,500 allowances.

It is unclear, however, whether the $1 billion program -- officially the Cash Allowance Rebate System -- is going to boost sales over time or merely pull forward purchases by customers planning to buy new vehicles in the weeks or months ahead. The program is due to expire Nov 1.

"I don't think this is permanent by any means," said Emir Abinion, a former Ford dealer who owns two Volkswagen dealerships in suburban Chicago. "It's just a shot in the arm...I don't know one dealer who would think this will be a catalyst for sales."

George Fowler, a Pontiac-Buick-GMC dealer in Dearborn, Mich., said he has made seven sales so far through the program. More than 30 people have come in hoping to buy, but most didn't meet the qualifications. Most of those participating, he said, would likely have bought a new vehicle in the coming months regardless of the discount.

"These are people who would have been in the market anyway, and they have a trade that was worth $1,500 and now is worth $4,500," he said.

Under the program, new-car buyers can get $3,500 or $4,500 in rebates when they trade in older vehicles for more fuel-efficient models. The program was passed by Congress and signed into law by President Barack Obama in June, but the rules and details were only laid out Friday by the National Highway Traffic Safety Administration.

The White House is counting on the rebates to spur vehicle sales at a time when auto makers have been hit particularly hard by the recession. U.S. auto sales are on pace to total about 10 million vehicles, down from about 13 million in 2008 and 16 million in 2007. Boosting new-vehicle sales would also help the administration's efforts to turn around General Motors Co. and Chrysler Group LLC.

Nearly 16,000 auto dealers signed up to participate in the program, and a government hotline has handled more than 45,000 calls from people seeking information, a Transportation Department spokeswoman said. A Web site for the program registered 1.5 million hits since Friday.

A few glitches have appeared. Some dealers said junkyards in their area are ill-prepared to handle the influx of older cars expected to be scrapped. Others said the 136-page instruction manual provided by the government is confusing. Some consumers have been disappointed their cars don't qualify. The NHTSA Web site where dealers must register to participate crashed for a time on Friday due to heavy use.

But the program is bringing car buyers into showrooms, said dealers. At Paragon Honda in Queens, N.Y., General Manager Brian Benstock said he started working out clunker trade-ins before the program's official launch and has sold 50 cars this month, including eight over the weekend.

Few older Hondas qualify for the program given their fuel-efficiency, but it has been a bonus for
foreign auto makers, he said. Many of the vehicles turned in are GM and Ford pickups, he said. "This has all been a market-share gain for us," Mr. Benstock said.

Steve Cook, owner of the Michigan dealership where Mr. Little bought his new Silverado, said the past weekend was the busiest he has had in months. "I'm going to sell in a week what I sold in a month."

Mike Adamson, who owns three franchises around Rochester, Minn., has seen the clunkers program triple overall sales at his Lincoln Mercury, Hyundai and Chrysler Dodge dealerships. On Monday, his dealerships had sold 50 vehicles that were awaiting final government approvals.
"It's way more than I could have anticipated," said Mr. Adamson.—Sharon Terlep, Matthew Dolan and Jeff Bennett contributed to this article.

Write to Josh Mitchell at joshua.mitchell@dowjones.com Printed in The Wall Street Journal, page B2