The annual year of the optimist
DRIVER'S SIDE DIATRIBE
Talk about a kumbaya moment. That word “optimism” epitomizes the start of each year in the auto industry. It’s January and the domestic auto show season continues with the North American International Auto Show in Detroit, then to Chicago in February, heading East at Easter-time to New York and then a long break until the Los Angeles show in November when it starts all over again. If there’s one thing the shows have in common it’s this: a smile is an auto executive’s umbrella. There is more optimism spewed at a major auto show than water running over Niagara Falls.
And even though this optimistic feeling is infectious, something to keep in mind is it was this type of show that witnessed the unbounded joy as the world was introduced to such “automotive icons” as the Pontiac Aztek, the Renault Fuego and every Bulgarian’s dream, the Yugo.
The various press conferences at a major auto show read like new math ÷ old math x future math because they’re all dealing with a number of possible auto sales for the calendar year. It starts at the beginning of the year with a wrap-up of the total sales figures for the recently-ended calendar year. Then they start with their projections and with each successive month and quarter they have actual numbers and pipe dreams to predict the next expected amount of sales for this coming year. For instance, before the toilet flushed in 2008 the auto industry was experiencing sales in the mid-17 million units (North American sales). They fell to under 10 million almost overnight – certainly within one calendar year. Now it appears we’re back to a mid-12 million units for 2011.
I wouldn’t be surprised to see optimistic numbers like high-13/low-14 million figures thrown around; for example, NADA’s chief analyst and predictor came up with 13.9 million units for 2012 at the Detroit show. Let’s not get carried away, people. I know everyone would like to see those stock prices jacked up based on industry optimism because bonuses are predicated on them.
Let’s be honest about this, Abe. If executives are predicting (this should say “hoping”) for an increase of almost 2 million vehicles does anybody have an idea of how much capital would be needed to purchase that many units? (I do, I do, I do!!!!) Based on a very conservative estimate of an average price of $18,000 per vehicle it would call for an increase of over $36 billion in needed revenue. You don’t find this kind of cash lying around a slag heap. We’re still staring down the barrel of 8.5% unemployment and the last thing some poor bastard on unemployment is looking to do is to help the economy by purchasing a new vehicle.
I would rather executives don’t get specific about sales numbers when there’s so many variables. Everybody gets excited and then when the projections fall far short then these same excited people are trying to un-bunch their panties. Just say that as an industry “we’re hoping to see a modest sales increase.” Short and sweet! Nobody is walking the plank like poor Billy Budd and laying their integrity and credibility on the line. I don’ t know about you but the last three big, bad wolves I’d want at my door because my words caused some manipulation of the stock market are Stuart Varney, Lou Dobbs and Neil Cavuto.
At least one thing is evident; the auto industry doesn’t whine when the final numbers are in like the retail industry. When the final auto sales numbers are in from the previous full year they are what they are. They don’t really work the numbers much other than to compare them to previous years; future projections; etc.
If you take one moral home from this story it’s this: optimism is good for the soul but realism is better for the brain. If you want to fudge numbers on your own then I’d suggest believing half of what you hear, divide that by 6 and take that number and stick it where the calculators don’t shine. With this kind of thinking you’ll probably never be an automotive executive…but at least you’ll have a handle on the real world.
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