Caution Flag Waves Over Los Angeles Auto Show
By Michelle Krebs November 20, 2008By Danny King
LOS ANGELES -- With its exhibit set in its own small wing of the Los Angeles Convention Center away from other automakers, its mix of new blindingly fast models with its classic roadsters, its trays of hors d'oeuvres for visitors and a visit from comedian and noted enthusiast Jerry Seinfeld, Porsche would appear to be the last carmaker to show the effects of a slumping auto industry at the Los Angeles auto show.
Don't be fooled, says the company's head of U.S. operations. The slowdown is not lost on him.
"I would be very happy if I could say this doesn't affect us or affects us differently from every other car manufacturers, but we all have the same problem," said Detlev von Platen, chief executive officer of Porsche Cars North America, Wednesday. "At the moment, we cannot count on the confidence of the consumers."
On a day when U.S. senators couldn't agree on whether or how to extend $25 billion worth of loans to help General Motors, Ford and Chrysler survive, the overriding mood during the first day of the Los Angeles auto show's exhibits for members of the press was one of restraint.
And restraint even from the luxury sector, as evidenced by Rolls-Royce cutting 2,000 production jobs on Wednesday.
Stuart McCullough, Bentley board member in charge of sales and marketing, said in an interview that the market hasn't hit bottom and, echoing comments by Porsche's von Platen, the top of the market isn't immune. "It's wishful thinking to believe the top of the market is immune," he said, adding Bentley is "anticipating a similar level of fall for 2009 with the market not bottoming out until at least 2010."
McCullough said the evidence of further economic deterioration is across industries and across the globe. "If you look outside the car market, the art auction world has suffered over the last two to three months...At the top end of the yacht market, you can find deals now where people had a boat on order for two years and just paid $50 million for it are trying to do deals for $30 million for immediate completion."
Look to Russia to show its impact even on new emerging markets. In Russia, property values have plummeted. "Even the Russian oligarchs have had their wealth burned," said Stuart.
"This is more significant than anything any of us have ever seen before," he said. And even if the wealthy still have money, he added, they aren't spending it. "Undoubtedly, there's wealth there and there are people whose wealth has not been affected by the current circumstances, but that doesn't mean they don't match their behavior to what's going on around them."
Indeed, in his morning keynote address, Nissan and Renault Chief Executive Officer Carlos Ghosn preached the twin virtues of cash conservation and zero emissions.
Honda's unveiling of its futuristic FC Sport hydrogen fuel-cell concept car got some of the
show's biggest "oohs" and "aahs" but the carmaker put its economy-size Fit closest to the center of the convention center's West Hall.
While Ford led off its presentation with a video featuring its Mustang sports car, it focused most of its floor time on the gas and hybrid versions of the decidedly less sexy Fusion. And, overall, compact and crossover vehicles proliferated while larger SUVs were harder to find.
"I have not seen one iota of depression in anybody's presentation," said Chris Denove, vice president at J.D. Power & Associates. "But certainly, when you go around to talk to people, one major topic is, 'How's everything going?'"
With their confidence shaken by the Wall Street meltdown, the lending crisis and gas prices
that have recently dropped after surpassing the $4 mark during the summer, consumers have responded by staying out of the showrooms. Last month, U.S. auto sales dropped 32 percent from a year earlier while the U.S. Labor Department said Wednesday that new and used car prices in October fell 0.7 percent from September.
Meantime, General Motors and Chrysler opted to skip the show.
Whether such economic conditions put a damper on the show's public attendance remains to be seen. The show is expected to draw about 1 million visitors for its 10-day public run ending November 30.
Even harder to gauge, though, are the prospects exhibiting carmakers are giving for a recovery. Many carmakers are running out of ways to get people to spend during the downturn, Denove said.
"I don't think there's much that the car manufacturers can do to stimulate sales if the economy does not pick up," said Denove. "You can only put so much cash on the hood of a car to try to sell it."
And while Ford President of the Americas Mark Fields told reporters after the company's presentation that sales have started to stabilize in recent months, he said it was "pretty evident that we're in unprecedented times."
Porsche's Von Platen was even less willing to make any predictions, saying that his company will rely on quick decisions and a relatively nimble supply chain to adjust to changes in demand.
"We have a very flexible production structure, which means that we always produce and supply one car less than what the demand is," said von Platen. "If I could tell you what would happen in the future, you wouldn't believe me."
Inside Line Senior Editor Erin Riches contributed to this report.
Photos by Danny King
1 - Ford unveiled its 2010 Ford Mustang GT convertible at the Los Angeles Auto Show.
2 - The media packed the Honda press conference at the Los Angeles Auto Show.
3 - Ford unveiled ts 2010 Ford Fusion hybrid at the Los Angeles Auto Show.
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