Crowds braving cold to visit auto show buttress forecast of industry's rebound

January 23, 1994|By Ted Shelsby | Ted Shelsby,Staff Writer

Braving temperatures below zero and streets covered with ice, thousands of car buffs and the curious challenged the weather last week to attend this year's International Auto Show at the Baltimore Convention Center.

Some cooed as they sat in Mercedes-Benz's new C-Class sedan. Some marveled at the ruggedness of the Hummer. And some just comparison shopped.

Promoter Raymond C. Nichols, president of International Auto Shows, conceded that the weather hurt attendance. Today from noon to 7 p.m. is the final day. "But," he said, "the people who are coming seem enthusiastic and eager to buy. I think dealers are going to have their best year in a long time."

For Maryland, it was welcome news indeed. A rebounding auto industry is a crucial component in the state's slowly improving economy.

Auto sales accounted for one out of every six dollars of Maryland's total retail trade in 1992, according to a new study from Walpert, Smullian & Blumenthal, a Towson-based accounting and management consultant company.

The 350 new-car dealers in the state generated about $7.8 billion business last year, the study found, and pumped more than $876 million into the state's economy in wages, salaries and other business activity. By comparison, that is more than five times the $170.1 million that the General Motors van assembly plant on Broening highway paid out in salaries and wages last year to its 3,400 workers.

In fact, despite its difficulties in recent years, auto retailing remains the 19th-largest employment category in the state, said Michael A. Conte, head of the University of Baltimore's Regional Economic Studies Program. "Auto sales is a very important signal of the state's economic health," he said.

Until recently, that signal was not encouraging. Although auto and light-truck sales nationwide rose 4 percent in 1992 and another 7.7 percent last year, the 13.9 million vehicles sold in 1993 was well below the peak of 16.1 million vehicles sold in 1986. In 1991 12.3 million vehicles were sold.

In Maryland, the drop was equally steep. According to the Walpert Smullian study, vehicle sales in the state fell 28 percent between 1986 and 1992.

During those difficult years, the number of dealers in Maryland fell to 350 from 400 in 1988.

Jacob J. Cohen, a partner at Walpert Smullian and head of its automotive division, said dealers that survived the industry shakeout were forced to take drastic action to remain viable.

Operating costs were cut 27 percent, according to the Walpert Smullian survey, through a reduction of inventory, advertising spending, and work force. Employment dropped to 18,600 workers in 1991 from 21,600 in 1989.

In recent months, though, the signs have become decidedly more positive.

The National Automobile Dealers Association has revised upward its sales outlook for 1994. The trade group had predicted vehicle sales of 14.3 million cars and light trucks this year, but increased it to 14.4 million last week, an increase of 3.6 percent from 1993.

Indeed, each of the Big Three automakers -- Ford Motor Co., General Motors Corp. and Chrysler Corp.-- are expecting gains this year.

Last week, analysts at Prudential Securities increased their estimate of GM's earnings this year. Saying GM had done a better-than-expected job of cutting costs at its North American operations, which haven't been profitable since 1988, the investment firm said the No. 1 U.S. automaker should earn $6.90 a share this year, up from previous estimates of $6.05 a share. Sometime in the next two weeks, GM is expected to report earnings of $2.29 a share for 1993.

Philip K. Fricke, a Prudential analyst, is predicting a steady rise in GM profits through 1997, when earnings are projected to reach $14.80 a share. Mr. Fricke noted GM's progress in building a profitable and competitive auto business in North America to add to its successful overseas operations.

Ford, which has redesigned its Mustang and is introducing a new Windstar minivan, is expected to enjoy a strong year with earnings possibly jumping 60 percent to $4 billion on sales of $103 billion.

And at Chrysler Corp., which is capturing consumer attention with its Neon, a front-wheel-drive economy car with dual air bags and anti-lock brakes, analysts are talking about a 29 percent jump in earnings to $2.7 billion this year.

Indeed, Chrysler, the first to announce 1993 earnings, captured the attention of Wall Street Tuesday when it exceeded the predictions of the most optimistic analysts and said fourth-quarter earnings were the highest in the company's history.

Chrysler's stock jumped 75 cents that day to $62.50 a share. The good news from Chrysler also gave a spurt to Ford's and GM's stock. Ford posted gains of 25 cents to close at $68.625 a share and GM closed jumped 37.5 cents to close at $62.125.

Local dealers are sharing Wall Street's optimism and hoping that the glowing predictions are borne out on the showroom floor. So far, there has been reason to be hopeful.

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