New cars may become relatively more affordable Some automakers have lowered prices on 1998 models

January 18, 1998|By Ted Shelsby | Ted Shelsby,SUN STAFF

This could be the year for the new-car buyer.

"We are entering into a period where cars are becoming more affordable," said David E. Cole, executive director of the University of Michigan's Center for the Study of Automotive Transportation.

"The industry is under great pressure to keep prices down, and this is good news for consumers."

Some Japanese automakers, including Honda Motor Co., Toyota Motor Corp. and Nissan Motor Co., have lowered prices on popular 1998 models by as much as $1,500, putting pressure on the domestic Big Three, said Cole. That pressure could intensify as the decline in Asian currencies lowers the price of imports.

Chrysler Corp. has trimmed the average cost of its car and trucks by 0.6 percent below comparable 1997 models. Ford Motor Co. has held the line on prices of its new models and General Motors Corp.'s decision to boost prices 1.3 percent marks its smallest increase in more than a decade.

Nevertheless, with the average new car price hovering close to $22,000 and the boom in used-car sales, new-car retailers in Maryland and the nation are expected to stay on cruise control as the industry posts another flat, but healthy, sales year.

Looking at other aspects of the state's automotive business, industry analysts and officials are predicting another stable production year for the GM van assembly plant in Southeast Baltimore, a flurry of activity on the used-car retailing front and possibly widespread Sunday car shopping.

For the nation as a whole, Cole said that new car and light truck sales this year are expected to mirror 1997.

"I don't see much changing in 1998," Cole said. "I see sales in the range of 15.1 million to 15.3 million units in 1998. Sales have been fairly stable the past four years, which is a good thing. It would be better if they were growing, but stability is better than a downturn."

J. David Power III, chairman of J.D. Power & Associates, an auto industry research and marketing firm in Agoura Hills, Calif., is not so optimistic.

He thinks that consumer demand is beginning to gear down and predicts sales of 14.9 million units this year and slightly lower sales in 1999 and 2000.

Maryland dealers may fare slightly better, according to Jacob J. Cohen, managing director for the Automotive Group of American Express Tax and Business Services Inc.'s Towson office.

"Sales might be slightly higher in 1998," said Cohen, "but we don't expect any significant change over 1997."

Cohen said that light trucks, including vans and sport utility vehicles, will remain the hot market, accounting for 60 percents of sales and cars for 40 percent.

"This is just the opposite of five years ago," he said.

While sport utility vehicles have been high-profit items for the auto makers, Cole said, consumers can expect to see some discounting this year as manufacturers move to clear out overproduction.

"We're seeing some incentives now, and my guess is that before the end of 1998 all the companies will be offering incentives," Cole said.

One model that did not see a pickup in consumer demand is GM's rear-wheel-drive midsized vans produced at its Broening Highway plant, even though Ford dropped its competing Aerostar last year.

"It will be business as usual in Baltimore," said Laura Cain, a Pontiac, Mich.-based spokeswoman for the Chevrolet Astro and GMC Safari assembly plant -- the city's largest manufacturer with 3,100 workers.

Cole said that despite current softness in the overall van market, output here should remain stable as a result of picking up some sales that would have gone to Aerostar.

Charles R. Alfred, president of United Auto Workers Local 239, which represents the hourly workers at the Baltimore van plant, said the outlook for '98 is good. With the plant working two eight-hour shifts a day, he anticipates steady employment and some overtime production this year.

Alfred said the union leadership will continue working with the company this year to help secure the long-term future of the plant.

GM plans to replace the vintage Astro and Safari with a new van after 2000. So far, it has not yet decided where the new van will be built.

One company that is close to a commitment to Maryland is AutoNation USA, the used-car superstore chain launched by Florida billionaire H. Wayne Huizenga.

According to William Badger, senior vice president of the Anne Arundel County Economic Development Corp., AutoNation is scheduled to break ground on aused-car outlet and car restoration center in the county before the end of the year.

The two facilities, which could employ up to 560 workers, would make AutoNation one of the largest new employers in the county in more than a decade.

AutoNation had canceled plans for the two facilities in Anne Arundel last year after the General Assembly failed to approve legislation that would have allowed it to sell cars on Sunday. But the company reconsidered and is in the process of obtaining permits needed for construction.

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