Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, October 28, 1994 TAG: 9410280107
SECTION: BUSINESS PAGE: A11 EDITION: METRO
SOURCE: CLAUDINE WILLIAMS STAFF WRITER
DATELINE: LENGTH: Medium
Improvements in the economy have prompted consumers to trade in their older cars, and they're buying American models, Roanoke-area dealers said.
The Big Three U.S. automakers have reported combined third-quarter earnings that are triple their profits of a year ago.
Combined earnings of Chrysler, Ford and General Motors for the quarter ended Sept. 30 were $2.3 billion, compared with $773 million a year earlier, when GM had a $113 million loss.
Now, people have more confidence in the economy, said Rodney Echols, a manager at Franklin Ford Mercury Chrysler Plymouth and Dodge Sales, in Rocky Mount. They are willing to invest money in a new car.
Generally, consumers are buying cars every 32 to 38 months, compared to about four years ago, when they waited 45 months.
"People just could not afford to buy cars in that economy," Echols said. "People have more consumer confidence."
Despite that, about 90 percent of customers in the last month at Shelor Automotive Shopping Center in Christiansburg have traded in vehicles with 100,000 miles or more, said Terry Hagan, the dealership's general sales manager.
"We have seen more and more people trading in cars," Hagan said.
Some of them are owners who have put off buying new cars for a few years. Now that interest rates are pretty low, "they don't want to spend the money on repairs. They would rather buy a new car."
Dealers say sales are doing so well, they are having problems getting enough vehicles to meet the demand.
General Motors Corp. predicted a 15 percent rise in sales in 1994, said Mike Cox, a new-car sales manager for Hart Motors in Salem. Instead, this year's sales rose 30 percent. Sales in Hart Motors rose 40 percent over 1993.
"We are stocking more cars and trucks now simply to fill the demand. We are constantly on the phone trying to get more vehicles in," Cox said. "And I expect sales to continue to rise."
David Cole, director of the University of Michigan's Office for the Study of Automotive Transportation, said the Big Three face capacity problems - they can't build enough of many popular new cars and trucks to satisfy short-term demand - that will prolong the market's strength.
"And they're absolutely committed to not adding capacity to meet the 'max' market," he said.
A major mistake auto executives made in the past was to build and staff factories to meet buyers' demand in the strongest sales years, Cole said.
That meant excess capacity and crippling costs in years when sales declined.
Also, an increase of new-car sales means more trade-ins, which has created an overflow of older used cars in smaller lots.
But the forecast for next year is based largely on the number of aging cars now on the road - likely to result in a steady stream of trade-ins.
"The age of the American fleet of cars is older right now than it has ever been," Cox said.
``'The best is yet to come' would be my very short assessment,'' Cole said.
The Associated Press contributed to this story.
THE BIG THREE THIRD-QUARTER RESULTS
Financial results reported by the Big Three automakers for July-September 1994, compared with the 1993 period:
Chrysler Corp.
Revenues: $11.7 billion, up 20 percent from $9.7 billion.
Net income: $651 million, up 54 percent from $423 million.
Earnings per share: $1.76 vs. $1.13.
Ford Motor Co.
Revenues: $30.6 billion, up 25 percent from $24.5 billion.
Net income: $1.1 billion, up 143 percent from $463 million.
Earnings per share: $1.04 vs. 40 cents.
General Motors Corp.
Revenues: $34.5 billion, up 14.5 percent from $30.1 billion.
Net income: $552 million, compared with a loss of $113 million.
Earnings per share: 40 cents vs. a loss of 49 cents.
Source: The companies
by CNB