Lower auto sales this year

Gearing down: Thanks to the state's economy, new car sales in Maryland should dip but still be respectable despite a national decline.

January 21, 2001|By Ted Shelsby | Ted Shelsby,SUN STAFF

The auto industry, which cruised to record sales last year in spite of a sputter in the closing months, faces a bumpier road in the year ahead.

New-car sales - both nationally and in Maryland - are expected to dip well below the record pace of the year that just ended.

Two regional automotive assembly plants - General Motor's van plant in Baltimore and Chrysler's Newark, Del., factory - will continue to face uncertain futures as auto manufacturers struggle with declining sales, shrinking market shares and unprofitable operations.

Just two weeks ago, General Motors slashed its forecast of first-quarter production by 21 percent, to 1.2 million vehicles. The GM cutbacks followed similar announcements by other U.S. automakers.

Ford Motor Co. said Dec. 21 it would produce 1,050,000 vehicles in the first quarter, down 17 percent from the first quarter of 2000.

DaimlerChrysler AG's Chrysler unit on Jan. 5 said it would make 678,700 vehicles in the first quarter, down 25.9 percent from the first quarter of 2000.

There also will be continued consolidation of auto dealerships.

One bright spot in the year ahead involves General Motors Corp's new Allison Transmission plant in White Marsh, which is scheduled to start full-scale production in early spring.

Nationally, dealers are expected to sell about a million fewer cars and light trucks this year than in 2000, when consumers bought a record 17.4 million vehicles.

"Sales will probably drop this year, but 2001 will not likely be a bad year for auto retailers," said David E. Cole, director of the Center for Automotive Research in Ann Arbor, Mich.

Maryland dealers will probably fare better than their colleagues in other parts of the country.

"We have a strong, diversified economy featuring service jobs, government employment and the technology industry," said Raymond C. Nichols, chairman of BSCAmerica Inc., a Baltimore automotive auction and service company that sells 100,000 vehicles a year.

"We are not recession proof," he said, "but we should fare better than most other states. I see Maryland auto dealers doing better on both new car and used car sales than dealers in other parts of the country."

Nichols said that sales of year-old used cars could be affected by a flurry of cash incentives and rebates from auto manufacturers trying to prop up the new-car market.

But, he said, there should continue to be strong consumer demand for used cars that are a little older.

"The auto is the basic mass transportation system in Maryland," said Nichols. "We are going to have our cars. Those people who can't afford to buy new cars are going to buy 2- to 5-year-old used cars. In that market, they get a lot of bang for their bucks"

Jacob J. Cohen, managing director of the auto dealer's group of American Express Tax and Business Services Inc., which provides financial services for many of the state's new-car dealerships, agreed that auto sales should be stronger in Maryland than other parts of the country.

"Our economy will be a little stronger," he said, explaining that federal employment is a major stabilizing force in the state.

But a slowing economy will likely change the auto buying habits of many consumers, according to Cohen.

He predicts that luxury cars will continue to sell well as the wealthy are less affected by any economic slowdown.

At the other end of the scale, he sees the smaller, less expensive cars doing better than in the past as some consumers tighten their purse strings.

Cohen also sees the recent trend of dealer consolidation continuing through 2001. "The big dealers are going to get bigger," he said.

He said there are also a lot of single point dealers with one, two or three auto franchises, who are looking to exit the industry.

Looking at the manufacturing side of the auto industry, Cole said 2001 will be another anxious year for the 1,500 workers at Baltimore's GM plant.

The world's largest automaker has said that it will continue producing the Chevrolet Astro and GMC Safari vans at the 65-year-old Broening Highway assembly plant until the third quarter of 2003.

Beyond that, the company says, consumer demand for the vans made here will determine the plant's future.

David Healy, an auto analyst with Burnham Securities, said Chrysler could eliminate several passenger car lines as part of its two- to four-year corporate restructuring and wind up with one or two surplus assembly plants. Should that occur, he said, the Dodge Durango truck plant in Newark, which employs about 800 Marylanders, could be closed.

Healy said the Newark plant is "geographically isolated" from other Chrysler plants, and the Durango could be produced at other plants.

Auto analysts have long said that it was to Baltimore's advantage to have a minicluster of auto assembly plants in the region. In addition to the Baltimore plant and the Chrysler plant in Newark, GM operates a Saturn plant in Wilmington, Del. A cluster of assembly plants helps to attract a network of nearby suppliers.

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