The Automotive Fleet & Leasing Association (AFLA) held its annual meeting and conference at the Hyatt Regency Hotel in Newport Beach, Calif., on Sept. 8-11. The successful conference attracted 215 attendees, which included a cross section of key industry representatives from major commercial fleets, factory fleet departments, fleet management companies, fleet dealers, and major auction chains. The keynote presenter was Maryann Keller, president of Maryann Keller & Associates, who spoke on the state of the automotive industry and future trends in vehicle remarketing. According to Keller, in today’s market, the preservation of market share is more important than profit per unit, which is impacting vehicle resale values. In comparison, during the 1990s, new-vehicle retail incentives virtually disappeared and new-vehicle prices edged upward each year, which, in turn, helped increase used-vehicle prices. However, the high retail incentives in today’s market are depressing used-vehicle resale values. Keller said the current new-vehicle market is saturated. “In the past five-and-a-half years, 100 million cars were purchased. Without incentives, 2004 (sales) would have been lower than 2003,” said Keller.” Low interest rates and huge retail incentives prevented the cyclical downturn that was anticipated in 2000. “Keeping people on the job, producing cars with incentives was a cheaper alternative than laying people off, but this wiped out pent up demand. What should help to bolster sales in upcoming model years is the forthcoming barrage of all-new models. For instance, more than 50 new models will be introduced in 2005- and 2006-model years. Among the concerns that Keller cited for the upcoming model year was the high price of gasoline and the high level of consumer debt. High gasoline prices are decreasing demand for large SUVs. “High fuel prices are not a temporary aberration,” said Keller. She said the increased global demand for fuel will help keep fuel prices high in the future. In terms of future resale values, Keller said that the huge increase in pickup production capacity and the incentives offered on these vehicles will lead to lower resale values. Keller also questioned the value of some optional equipment in increasing resale value. For instance, she cited in-vehicle navigation systems, which she said do not hold value and are fully depreciated in just three years. Following Keller’s keynote address was Lisa Whalen, director of global market and industry analysis for General Motors. In her presentation, Whalen provided an industry forecast and analysis of the U.S. auto market. “The U.S. economy is working its way through a (current) soft patch,” said Whalen. GM’s forecast for new vehicle sales for the 2004 calendar year is 17.1 million units. The best selling vehicle segments in the retail market are trucks and luxury cars. However, she felt that higher fuel prices would not impact large SUV sales. “Even at $40 per barrel, the high cost of oil is not affecting large SUVs. These vehicles are being bought by high-income individuals, who can best afford the higher fuel prices.” Whalen anticipated that fuel prices will decline. “The oil industry is a cyclical industry.”Whalen predicted that new-vehicle price restraints and incentives are here to stay. “Since the mid 1990s, there has been price deflation. Whalen also predicted that as the U.S. population ages, it will lose its “love affair with trucks” and move to crossover vehicles. “Trucks will continue to outsell cars for the next 10 years, but not at the pace they have done so in the past,” she said.Another major topic covered at the conference was vehicle remarketing. Dean Eisner, president and CEO of Manheim, gave a forecast of emerging trends in vehicle remarketing. “There will be a constant cascading marketplace for selling cars.” Eisner called this “Remarketing 360.” According to Eisner, cascading remarketing starts with offering vehicles for sale to drivers, then at dealerships via online programs such as Manheim’s Dealer Exchange, marshalling yards, the auction, and then at the retail level. Eisner says physical auctions will continue to play an integral role in the remarketing of fleet vehicles, and new technologies such as the Internet will be incorporated as part of the “cascading marketplace.” Among the new technologies Eisner cited were the use of radio frequency identification (RFID) for quicker location of vehicles in auction marshalling yards, the use of biometric identification for dealer check-in, and the increase in the number of vehicles remarketed over the Internet. “Currently, 15 percent of all cars are remarketed over the Internet,” said Eisner.
Among the other speakers were: Kathy Marinello, president/CEO of GE Commercial Finance Fleet Services, who spoke on “Create the Connection – Network with the Experts.”
Don Schaffer, senior VP/CFO of LeasePlan USA, who spoke on “The New International Accounting Standards and the Effect on Leasing.”
Mike Antich, editor of Automotive Fleet magazine, who discussed “Emerging Trends in Commercial Fleet Management.”
Janis Christensen, president of Christensen & Day Group, spoke on the "Importance of Lifecycle Cost Analysis."
In addition, the conference offered two highly acclaimed panel discussions. The first panel discussion included remarketers who spoke on current trends in vehicle remarketing and the other featured factory representatives from GM, Ford, DaimlerChrysler, and Toyota who spoke on trends in commercial fleet sales. The 2005 AFLA Annual Meeting and Conference will take place Sept. 7-10, at the Camelback Resort in Phoenix, Ariz. For more information, visit www.aflaonline.org/.