Used-car values will stabilize at a 2-4 percent average annual growth, predicted Dick Schiliesmann of Wells Fargo Bank during the recent Conference on Automotive Remarketing. One reason for the slow growth is that the supply of new vehicles continues to exceed consumer demand. "This overproduction is forcing manufacturers to pull the market by lowering new- vehicle prices and increasing incentives. This will drag down used-vehicle prices," added Schiliesmann. Other remarketing experts, however, regarded Schiliesmann's prediction as optimistic and said that there will be no price growth for used vehicles in the coming year. For instance, Bill Jensen, senior vice president of Bank of America, said "Manufacturers have been pulling their cars through the market with incentives because there is an oversupply in the market. As a result, the transaction prices are staying flat. Therefore, used-car prices will likewise stay flat." These and other predictions about the used-vehicle market were made to a record turnout of more than 500 vehicle remarketing professionals at CAR '99, a three-day conference sponsored by Bobit Publishing, which was held Feb. 28 to March 2, 1999 at Bally's Hotel in Las Vegas. This year's meeting featured 41 industry experts, who discussed the latest trends in vehicle remarketing, and 33 exhibitors, who displayed their latest products and services. The opening day keynote speaker was Tom Eggleston, founder of Driver Mart, and who is now a senior vice president of operations for AutoNation after it purchased his company. Among the highlights of Egg- leston's presentation was a discussion of AutoNation's Mile High Project in Denver, which involves the 17 John Elway dealerships. The goal of the project is to identify ways to make the auto-buying experience more appealing to consumers, who currently rate it just above going to a dentist. Among the concepts being tested in the Mile High Project are one-price selling, a three-day money-back guarantee on all purchases, a 150-point vehicle inspection, and the creation of an Internet site known as Compass. The John Elway AutoNation sales force are required to respond to all Internet inquiries within two days. Eggleston predicted the Internet would become a key sales tool for dealers and cited the fact that half the booths at this year's National Automobile Dealers Association Convention were Internet-related. Only 8 Manufacturers by 2008 Another CAR '99 speaker was Jim Mateyka of A.T. Kearney, who predicted that there will be only eight global manufacturers by 2008. These eight manufacturers, in turn, will be supplied by only 150 global systems integrators who will dominate the supplier side of the business. Art Spinela, vice president and general manager of CNW Marketing, predicted that as a result of declining consumer electronic prices and the subsequent increase in consumer disposable income, the average annual number of new vehicles sold could increase to 17 million units. John McElroy, editor of Automotive Industries, discussed the General Motors Yellowstone project, which seeks to co-design entire vehicle modules with its suppliers. For instance, the upcoming Gamma, Delta, and Epilson car projects will be assembled out of 15 modules built by suppliers. By connecting the modules together, GM would assemble a complete automobile. "Modular design will help the auto industry reduce costs and increase quality," said McElroy. "If Yellowstone works for small cars, it will certainly work with large cars." He added, "We may be on the verge of having a contract auto manufacturer, whereby an outside company designs the vehicle, a supplier builds it, and an independent retail chain sells it." Elizabeth Spears, economist for the National Automobile Dealers Association, predicted that 15 million new vehicles will be sold in the 1999-model year. One reason for the strong sales is that "leasing is creating a more stable churn rate," said Spears. "I expect the peaks and valleys of the 1980s to be less pronounced in future years," she said. Other contributing factors include low interest rates, rising household income, and lower vehicle operating costs. One interesting side note is that Spears reported that used-vehicle leasing was growing, primarily with high-end vehicles. The high volume of new-vehicle sales will help increase the volume of used-vehicle sales, according to Rick Spitzer, director of industry analysis for The Polk Co. He said the shift to leasing from personal ownership has been driving the growth in the used-vehicle market by increasing the volume of late-model, low-mileage vehicles in the wholesale market. "However, leasing appears to have peaked in 1997 at 25 percent following the residual losses experienced by lessors. Leasing subsequently declined to 24 percent of the market in 1998 as manufacturers became less aggressive in pushing leases," said Spitzer. A new software program designed to assist manufacturers in distributing and maximizing the profits of program vehicles and end-of-term vehicles was introduced by Urban Science based in Long Beach, CA. Known as ReMarketPlus, the software program uses state-of-the-art statistical modeling techniques, which also can be used by fleet management companies and large fleet operations to optimize the remarketing of their out-of-service vehicles.

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