This Week in Car Buying: GM to cut plants, cars; Sales expected to drop; Long term loans at limit; Car of the year finalists
General Motors announced that it is looking to close some assembly plants and cut several car lines, but stopped short of announcing definitive plans of what’s on the chopping block and when. The three plants with “unallocated” production are Oshawa, Ontario, Lordstown, Ohio and Detroit-Hamtramck, Michigan. Among the affected products are GM’s large cars, the Buick LaCrosse, Chevrolet Impala, Cadillac CT6 and XTS, as well as Chevy’s Cruze compact and Volt plug-in electric hybrid.
Analysts say the plant closures and restructuring could be posturing by GM ahead of next summer’s contract negotiations with the United Auto Workers and Unifor, which represents Canadian laborers. However, GM has made no secret that it has wanted to close Oshawa, one of its oldest plants, for a long time and has used it for cars and trucks it is either selling to fleets or phasing out. Currently, Oshawa builds the Cadillac XTS and Chevy Impala as well as the previous generation 2018 Chevy Silverado and GMC Sierra pickups. In GM’s announcement, the soonest Oshawa would close would be a year from now.
More imminent would be a shutdown of Detroit-Hamtramck. Production of Buick LaCrosse and Chevy Volt ends March 1, while the Cadillac CT6 and Chevy Impala lines will shut down June 1. Lordstown Assembly builds only one product, the Chevrolet Cruze. Operations have been scaled back from three shifts to one. With Cruze sales off 27 percent, the plant will end production March 1. Also affected is the Cruze hatchback from Mexico, which will also see its run end the same day.
Sales expected to drop
The industry expects an estimated 2 percent decline in sales in November and may be the leading edge of a slowdown that may extend into next year. J.D. Power is estimating that retail vehicle sales may hit 13.8 million next year, down slightly from last year’s 14.0 million. While the industry has sold more than 17 million in each of the past four years, fleet sales have made up the difference. While retail sales may slide, it’s believed that fleet sales may actually increase by nearly 3 percent to keep the industry at or near its record levels, a reversal from recent actions that looked to limit fleet sales and concentrate on lifting the share of more profitable retail transactions.
Still, even though November sales are expected to be lower than a year earlier, the increasing use of Thanksgiving-related Black Friday sales has helped the month not to be a traditional slow seller. According to Automotive News back in 2005 November accounted for about 6.9 percent of the year’s sales, while last year it climbed to 8.1 percent. The sales also provide a great jumping off point for December’s holiday sales events, which have gained in popularity.
Loan term loans at limit
Lenders may have reached the upper limit on the length of consumer car loans, according to a recent report in Automotive News. Right now the upper limit is 84 month or 7 year loans. Financial institutions are balking at extending terms further even if dealers press for longer contracts or to carry some of that negative equity from the previous car in the new loan. Chuck Berend, director of U.S. auto lending at BBVA Compass told a panel at the Auto Finance Summit that he won’t underwrite really long loans for underwater buyers because “I just don’t like financing the last car when financing this car.”
Contributing to this pressure on lenders to lengthen contracts are rising transaction prices, combined with lower down payment requirements. Long term loans, while delivering more interest in aggregate, also mean carrying risk longer on a financial institution’s books.
The trade paper also reported that Jerry Bowen, from Wells Fargo Auto, questions the value of these contracts in building a relationship with the customer. "I'm not sure the dealer thinks that's a good outcome because the dealer wants every opportunity to get the consumer back sooner than that," he said. "And, too often, when they do get the consumer back, the consumer is upside down on their vehicle, which makes it a pretty tough conversation for the dealer and the lender."
Car of the year finalists
The North American Car, Truck and Utility of the Year jury has released its list of finalists for the prestigious awards that will be announced in Detroit next January. The three cars voted as finalists from a field of 14 by the jury of journalists include the 2019 Genesis G70 sport sedan, the 2019 Honda Insight hybrid and the 2019 Volvo S60/V60 sedan and wagon.
“This year brought us some impressive sedan options. Car sales remain an important part of the available choices to consumers even as sales in the segment continue to fall,” said NACTOY President Lauren Fix said. “We are always looking for a game-changer, something that stands out in a crowd, and strikes a positive chord with buyers. The finalists will all be impressive options to consider.”
In the truck category, the three finalists are the redesigned 2019 Chevrolet Silverado, the 2019 GMC Sierra and the 2019 Ram 1500. No juror voting was necessary in the truck category because only three candidates are on the eligibility list for the 2019 North American Truck of The Year. But that lack of candidates doesn’t diminish the category’s importance.
“Full-size trucks are the financial engines that power the auto industry, and this year, we’re fortunate to have three great new ones to consider,” said NACTOY Vice President Chris Paukert. “From a new mild hybrid system to a carbon fiber bed and a Swiss Army knife-like tailgate, this year’s truck crop is packed with customer-friendly innovations.”
A crowded field of 12 utility vehicles has been winnowed down to three including two models that boast EV capability. Those vehicles are the 2019 Acura RDX, the 2019 Hyundai Kona and Kona EV and the 2019 Jaguar I-Pace EV. “The utility class is the most hotly contested of our categories,” said NACTOY Secretary-Treasurer Kirk Bell. “Contenders range from game-changing electrics to mainstream brands that have upped their game to luxury brands that are pushing the envelope. Our winner in this class will face the stiffest competition in the auto industry's hottest market.”
Last year’s winners of the awards included the 2018 Honda Accord as North American Car of the Year, the 2018 Volvo XC60 was North American Utility of the Year and the 2018 Lincoln Navigator took North American Truck of the Year honors.
One of the most anticipated vehicles of the year is the 2020 Jeep Gladiator pickup. This new midsize pickup goes on sale next year.
Hyundai is replacing its Santa Fe XL with the all-new 2020 Hyundai Palisade, a 3-row SUV with seating for eight.
In addition to Gladiator and Palisade, the Los Angeles Auto Show included a host of new SUVs, redesigned compacts and some interesting EVs.
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