Fleet and Leasing Industry to Grow As Car Sales Rise

New car sales have increased tremendously during 1978 and with this upswing has come an impetus for more dealers to branch out into the leasing business. Chrysler Corporation's general manager of fleet leasing, Richard McLaughlin, in addressing the New Hampshire Automobile Dealers Association Convention in June, led off with facts and figures of the 1978 new car sales successes, pointing out that dealers are naturals for the leasing business since they "have the backing of the manufacturers, the facilities for the product and the staff for it."

The public's relation to the new smaller cars, after a period of wait-and-see, has been positive and during the spring of this year, McLaughlin said, sales were in record proportions. April domestic car sales hit a high of 873,000 units and the May figure of 976,000 units was even better. Car sales in June, he pointed out, were two-percent ahead of the same period last year and the annual selling rate is now running at an estimated 10.3-million cars about four-million trucks. He expected this trend to continue and, in so doing, car dealers are offered some tremendous opportunities for growth and profit. In fact, auto sales are increasing at a faster rate than total retail sales of all consumer goods, said McLaughlin.

He also pointed out the fact that there has been a "dramatic upturn in the fleet and leasing business. At a time when prices in general are rising, more and more people are becoming aware of the financial advantages of leasing. Self-employed professional, such as doctors and lawyers, are turning to leasing as a convenient and economical way of getting a new car every year. And leasing is popular with young people who don't have a large down payment but want to drive a late model car."

McLaughlin stated that approximately 10,000 dealers are involved in leasing at present and that the number of leased units has grown from less than four-percent of all vehicles in service ten years ago to about ten-percent of all sales. He felt that, "It's the smart dealers - the ones who aim for that 100-percent coverage - who are reaping the benefits from the leasing mini-boom."

Chrysler estimates that by the mid-1980s leasing will account for 20-percent of the industry's sales although that figure may be conservative. GM, for example, forecasts the leasing figure for the mid-1980s to be somewhere around 40-percent of the car market.

New customer demands and federal requirements are precipitating the most dramatic automotive design and operating changes ever experienced by the industry. McLaughlin stated "between now and 1985, the American auto industry will spend an estimated $78.5 billion to build an entirely new fleet of cars for the North American public. That's a lot more than it cost to put a man on the moon. But that's what it will take to meet the requirements of the law and the demands of our customers."

His facts concerning the car of the future were promising in the areas of pollution control and fuel economy. The billions of dollars expected to be spent will pay off in "the cleanest vehicles we've ever offered, with emissions reduced more than 90-percent from uncontrolled levels," McLaughlin said. "We'll have the most fuel-efficient vehicles in our industry's history, with average fuel economy by 1985 50-percent better than today. By 1985, by government calculations, autos will consume 18-percent less gasoline, even though the number of vehicles on the road will have increased by 18-percent." He praised the automotive industry in adding, "I don't know of any other industry that has done as much to reduce emissions and conserve energy."

McLaughlin continued by discussing the improved manufacturing techniques being employed by Chrysler. The manufacturer is now, for example, using machines to make 90-percent of all the welds, thereby producing sturdier, more reliable car bodies. In addition, electronic, computer-run quality control tests are being made on transmissions, electrical systems, brakes and other components to make sure that each car is right before it's shipped to the dealer. He voiced an optimistic view of the future when he added, "With these innovations in product design and manufacturing, I believe we can achieve a brand-new era of customer satisfaction that can help assure the continued growth of our industry."

McLaughlin's greatest concern during the course of his speech was the increasing regulations being imposed on the auto industry by the federal government. He felt, however, that the issue is not the regulations that the industry is already having to live with but the regulations that threaten to be imposed in the future. "We estimate," McLaughlin emphasized, "that between now and 1985, safety, emissions, and fuel economy regulations already on the books will add an additional $1,000 to the price of each new car, even before the effects of inflation." He then added an optimistic note: "The trend doesn't have to continue."

As the general public becomes more aware of and more tired of excessive regulations, they will fight back, just as certain groups have been doing. McLaughlin felt that with inflation spiraling, the public will not tolerate regulations that are costly but do not offer commensurate benefits. He cited that some unions, minority groups and the press are focusing attention on costly and unnecessary regulations in an attempt to get the government to consider the adverse effects of excessive regulations.

The facts McLaughlin presented to substantiate his opposition to excessive governmental regulations were startling. The public sees, he said, "no less than 87 federal agencies that regulate U.S. business and dispense more than 4,000 forms each year. It takes U.S. business more than 143-million hours of executive and clerical effort to fill out those forms. In total cost, the annual bill for government regulation is somewhere around $103-billion." At Chrysler, a computer printout was received which presented a description and status report of all the bills which contained the words automobile, automotive or motor vehicle that were introduced in Congress since January. "That printout," McLaughlin said, "ran to more than 339 11-by-inch pages. When Congress needs a computer to keep track of all the bills it has proposed affecting our industry, we know we're in trouble."

Of direct impact to the audience of car dealers were McLaughlin's remarks concerning the direction the regulations are beginning to take. Instead of focusing solely on the manufacturers, the government is now directing its regulation at the dealers and their customers. "As an example," he said, "look what dealers will be up against with the EPA's new fuel economy labeling requirement for 1979. New car stickers now display three separate mileage figures - one for city driving, one for highway driving, and a combined city/highway average. The figures come from the emissions tests that EPA runs and don't always correspond to the mileage that drivers actually get under various driving conditions. In order to clear up the confusion EPA will allow us to use only the lowest of the three, the city mileage figure for 1979."

He continued, "At first glance, the city mileage figure has the apparent advantage of rock-bottom reliability, and may seem like an improvement. But the new approach actually opens the door to further misunderstanding."

Instead of offering rock-bottom reliability, he said, the new approach will add to the fuel economy confusion since the city figure does not allow for improvements such as overdrive or better aerodynamics and is lower than the combined average fuel economy figure of 19 mpg required by the entire fleet of passenger cars for 1979. Customers, aware of the 19 mpg requirement, may actually find a lower figure listed on the sticker on the car in the showroom and blame the discrepancy on the manufacturer or dealer.

In addition to the more stringent mileage labeling requirements, McLaughlin reported that the National Highway Traffic Safety Administration is considering adding more regulations to auto repair and maintenance. A list of 22 remedies to problems encountered in dealings between the public and auto repair services includes licensing and ratings of repair facilities, licensing of mechanics, federal standards affecting replacement parts and mandatory diagnostic inspection in every state.

"And as part of whatever program NHTSA finally adopts," he added, "the agency advocates the following methods of compiling repair data: (1) random owner surveys; (2) vehicle tracking by a selected group of owners who would keep 'diary records' of all the work performed on their cars, and (3) 'blue goose' studies - or the practice of bringing vehicles with contrived defects into repair shops to trap dealers or repair shop owners who sell unneeded repairs."

McLaughlin concluded by praising the dealers for the work they have already done in trying to get a more reasoned approach to government regulation. "You have proved," he said, "the old political maxim that a visit from a consistuent is worth far more than a visit from the chairman of the board. The lesson hasn't been lost on other groups who are also trying to curb the flow of excessive regulations and restore the traditional balance between business and government. By taking a strong position, and encouraging others to do the same, by insisting that government action be based on proven need, and by warning the public of regulations that cost more than they provide in benefits, we are working to preserve the necessary balance between the public and private sectors of the nation."

The issue, he concluded, is not just the debate of regulations affecting the auto industry but the significant and fundamental issues involving the balance of power between business and government. "We need to remember," he said, "that each has its own contribution to make, and if we can achieve the right balance, business and government can help the country achieve progress against problems of inflation, jobs, energy, the environment, and all the rest."