Are We Headed for a Fiscal Cliff?

First Up 09/06/12

September 6, 2012

Ray on Point: Are We Headed for a Fiscal Cliff?
Have you heard the term “fiscal cliff” lately? According to AIADA Chairman Ray Mungenast, it looks like the United States is headed for one at serious speed. The Budget Control Act of 2011 established a bipartisan ‘supercommittee,’ which had until the end of November 2011 to pass a budget that would decrease the deficit by $1.2 trillion over the next ten years. Their inability to do so triggered another part of the act requiring sequestrations slated to take effect January 2, 2013. At the same time the sequestrations will take effect, the exemptions to the alternative minimum tax and the extension of the Bush-era tax cuts will both expire. This is not a simple problem with a simple answer. In the next few months Congress and the president need to earn their keep by making some tough decisions. The uncertainty that has existed since August 2011, when the Budget Control Act passed, has had a chilling effect on our businesses and our economy. Can you run a small business like that? No way. Can you run a country like that? Hopefully we won’t find out in 2013. Read the rest of AIADA Chairman Ray Mungenast’s blog on the dangerous fiscal cliff we are headed toward here.

Kia Making Inroads on U.S. Automotive Market
South Korean automaker Kia is targeted to finish 2012 with a 4 percent U.S. market share, its highest ever, one of its executives said Wednesday. The Detroit News reports that Kia Motors America has seen vehicle sales skyrocket, particularly during the past two years, when it has set sales records for 24 consecutive months. Michael Sprague, executive vice president of marketing and communication, speaking at an Automotive Press Association event Wednesday, said a 4 percent share of the U.S. market will top last year's 3.8 percent share. That finish will continue Kia's string of 17 consecutive years of growth in U.S. market share. Kia is planning to introduce seven new or refreshed models in 2013 and executives said it will show off a redesigned Forte compact car and an updated Sorento midsize crossover at this fall's Los Angeles Auto Show. "We are going to have a very, very busy auto show circuit," said Tom Loveless, executive vice president of sales for Kia Motors America. Kia, which has relaunched the Soul every year since its 2009 debut, is doing so again this year to capitalize on its growing popularity. Click here for more on Kia’s success and how it plans to continue.

UAW's King, Ex-CarMax chief Ligon Lead Obama's Defense of Auto Bailout
UAW President Bob King, defending the 2009 auto industry bailouts before a national television audience, said the government-financed bankruptcies of General Motors and Chrysler weren't "universally popular" but were "absolutely right." CarMax co-founder Austin Ligon joined in the effort. King, speaking Wednesday night to delegates at the 2012 Democratic National Convention in Charlotte, N.C., said a rejuvenated auto industry is leading the nation's economic recovery. According to Automotive News, the successful 2009 auto bailout has become s a centerpiece of President Obama's campaign for re-election, in part because of its contrast to an opinion piece by Republican nominee Mitt Romney headlined "Let Detroit Go Bankrupt." Before King's appearance, the party put on a video showing all the benefits of the auto bailout, including testimonials from UAW rank-and-file workers whose jobs were saved by the bailout. King's speech was preceded by remarks from Austin Ligon, co-founder and former CEO of CarMax Inc. Ligon praised the bailout, along with the U.S. government's cash-for-clunkers program, which helped boost U.S. auto sales in August and September of 2009 just after the bankruptcies. Read more on how the 2009 auto bailout is playing a pivotal role at this week’s Democratic National Convention here.

Volkswagen's New Golf Hatchback is Headed for U.S.
Volkswagen is rolling out the latest version of its Golf hatchback in a key test of its ability to widen its lead over other mass market carmakers in Europe, lower manufacturing costs, and overtake Toyota as the world's biggest carmaker. It's coming to the U.S., too. USA Today reports that the new Golf looks much like the old one, but the key differences are on the inside. Click here for a picture. The car has been completely redesigned, based on a new common mechanical structure for the chassis, engine, and other basic parts. The new Golf is "the acid test" of VW's effort to ramp up mass production of the new common platform and achieve lower costs while maintaining quality standards. The common structure will underpin not just the Golf, but other Volkswagen vehicles. Savings from sharing parts should make the company's cars cheaper to build, analysts say. Those savings in turn will help VW add on more environmental, safety, and energy-saving features that will boost the car's perceived value to consumers. And that, in turn, should let Volkswagen charge more and reap higher profit margins. Click here for more on the new VW Golf.

Volvo Sticks with Investment
Volvo Car Corp. Chief Executive Stefan Jacoby is pushing forward with an aggressive $11-billion, five-year investment plan despite a first-half loss due to falling sales in its most significant markets. According to The Wall Street Journal, Mr. Jacoby, in an interview in Stockholm on Wednesday, confirmed the Chinese-owned automaker will slow production at its plant in Gothenburg, Sweden next month and curtail recruiting efforts to stanch its hefty cash burn. He said it would be hard for Volvo to turn a profit this year, citing a difficult outlook for the second half, and admitted "it will be a challenge to maintain investments." The company reported cash outflows of 2.27 billion kronor ($338 million) during the first six months of the year, compared with positive cash flow of 4.1 billion kronor a year ago. In order to compete with German rivals over the longer term, Mr. Jacoby is sticking with his plan to invest in new technology and factories to widen the Swedish car maker's footprint, including rapid expansion in China with two plants. Volvo also is developing a new vehicle architecture and new engines. For the latest on Volvo’s plan to remain competitive, click here.

Outsourcing Loaners Yields Benefits for Dealerships from Coast to Coast
Mercedes-Benz of Beverly Hills, Lindsay Honda in Columbus, Ohio, BMW of Sarasota and Ancira Nissan of San Antonio have more in common than one might think. Like a growing number of dealerships nationwide, they have discovered how outsourcing service loaners through Enterprise Rent-A-Car instead of using cars from their own inventory saves money and increases efficiencies. Besides providing clean, well-maintained vehicles to customers, dealerships can reduce liability exposure, lower inventory expense, and give service advisors more time to take care of customers instead of administering loaner cars. To manage loaners efficiently, dealerships use the Automated Rental Management System (ARMS®) application from Enterprise Rent-A-Car, the largest rental car brand in North America. ARMS® creates seamless electronic communications between the dealership’s service advisors and Enterprise to track rental days, reduce errors, avoid delays and control costs. According to Enterprise, eliminating 30 to 50 loaners from a dealership’s own inventory can free up $600,000 to $1 million in inventory expense. In today’s economic environment, that’s a great deal for dealerships. For a free Enterprise Loaner Program Analysis click here or email for more information.

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