April 1974 - Spring Meeting
Date: April 1974
Location: New York City, Waldorf-Astoria
The following is an article that appeared in the May 1974 issue of Automotive Fleet.
"The worst appears behind us," commented one AFLA member as the Automotive Fleet & Leasing Association (AFLA) met at the Waldorf-Astoria in New York City. "Things are improving, but still could be better."
And with this attitude, fully supported by improved market conditions in the standard and intermediate-size vehicles, AFLA tackled the problems of buying and selling at their Annual Meeting in April.
Harry Quinn of ARI began the meeting with the keynote address on "Today's Challenge." Duke Tookman of Fleetway Leasing then followed, addressing his remarks on "Managerial Considerations in Buying and Selling." Tookman discussed how the nation's companies are not through with the standard-size vehicle. "In fact," he explains, "one company wants their engineers to be in a safe car with no driver fatigue, so they have held to the larger-sized vehicles. Another company will not let a driver buy or use a Vega, Pinto, etc., until they have test-driven one. After the test drive, the larger, more comfortable car becomes more to their liking."
The Used Car Market
The car business is about to turn the corner, announced E.E. "Gene" Williams, Supervisor of Used Vehicle Promotion of Ford Division. In his presentation "Crystal-Balling the Used Car Market," Williams indicated that the market will soon settle down, with the unrealistic prices of the standard-size vehicle becoming a thing of the past.
Williams also announced a $1 million program by the Ford Division on reconditioning which will help dealers market used vehicles. This program hopes to help the dealer build buyer confidence, to provide consumer protection in the form of warranties, and to help establish a good image of the used car market.
Bank Leasing: Purchase & Resale
The bank leasing approach to purchase and resale was presented by James Davidow, president of First Lease. Davidow feels that banks will stimulate the leasing business, but will not be unfair competition, as many automobile leasing companies believe. In commenting on his experiences with First Lease in the purchase of cars, Davidow explained the company's large Chicago-area dealer network. On resale, First Lease allows the purchasing dealer first chance to bid on the lease car. "However, First Lease's cars are difference than the normal car in both size and equipment," said Davidow. "And in this sense, the cars are more desirable than the average fleet car. Most of First Lease's units average a cost of $5,000."
Even though the First Lease program is less than a year old, Davidow estimates that one-third of the cars to be merchandised (coming off lease) will be sold back to the original dealer. Those that are not will be sold to other dealers in the First Lease dealer network. Units not taken by the dealers will then be sold to used car outlets.
Energy and Transportation
Generally, the poor market conditions in the industry have been brought about by the energy crisis. So when speaker H.E. Rodarmer, Texaco's Manager of the National Accounts Division presented his discussion on "Energy Impact in Transportation," all were hoping for some better news on the gasoline situation this summer and following fall.
But Rodarmer was not very optimistic about gasoline for the summer, indicating that "America will be able to have its needs, but not its desires" in the warm months ahead. "America's gasoline requirements are 17 million barrels of gasoline a day," Rodarmer continued. "Refinery capacity is only 13 ½ million barrels a day, however. And there is only 11 million barrels of crude available daily. Refineries are running at 85-percent capacity due to lack of crude oil, and there appears problems ahead unless a blance achieved between supply and demand."
John McKean of LMV, another speaker on the fuel crisis portion of the AFLA program, also was not very optimistic. "Although there have been price increases on new units of up to $600, the used vehicle prices have not increased as well," said McKean. "And the added depreciation due to mileage on the used vehicles range from the low hundreds to the high hundreds. Clocking is still an everyday occurrence. In fact, if clocking was not being done, companies would have to run their cars until the wheels fell off. The intent, not to defraud the the public is a great idea, but the odometer law has now worked that way in reality."
Large jumps in running costs are evident due to gasoline price increases, explained Bob Kasterngren, executive vice president with Runzheimer and Company. As an example, Kastergren mentioned San Francisco, whose costs per mile in gasoline went from 3.8c to 5.2c in the last 17 months. And the rise in price has not leveled off by any means. Kastergren sees a 75c a gallon national price by the end of this year.
The important role of the warranty with the used vehicle was discussed in length by Larry Shore, Fleet Aid Corporation. "The warranty seems to be necessary to destroy an unfavorable stigma connected with the used fleet vehicle," he said. Attached to the stigma are two basic problems: 1. How to overcome the fleet care fear and, 2. How to overcome the fear of high mileage."
A test was made with two cars to see the effect of the warranty on the used fleet vehicle. Two LTD's were used, each with about 27,000 miles. One car was under warranty for one year or 12,000 miles. The other was not. The reaction to the warranty was remarkably favorable.
Shore summarized the basic advantages of the warranty: 1. It helps the disposal of a large number of automobiles and, 2. It establishes credibility for the seller. Today a warranty can cover some vehicle systems up to 80,000 miles.
AFLA's Used-Car Panel, remarking on "How to Merchandise Used Cars in a Shadow of Uncertainty," told of a depressed market only now gaining some normalcy about it.
Warren Young of the Manheim Services Corporation (responsible for 12 auctions in 10 states) told of November and December (1973) being the most financially and morally damaging months in many years. Some large-size cars took a nose dive of up to $1,000. Improvement was slow, beginning in the third week of January, and in the middle of March strong improvement was recorded.
Young felt that the factors affecting this rise in the market were: 1. People who work on cars knew that the value was still there, 2. Manufacturers cut down manufacturing the standard-size cars, and 3. Retail new car sales were off dramatically. Young feels that the standard-size cars will remain strong through June.
Contacting an excellent wholesaler who knows where take cars, and what time of day to sell the car is the type of contact needed in working with the wholesale selling of used fleet vehicles. Mort Gallub, president of Hatfield Reconditioning Center (and independent wholesaler) feels that the image of wholesaling is tarnished, and suggests that wholesalers hire people who are experts. "Don't hire people cheap. Hire the right people, and pay them well," says Gallub. Then you can sell a care for $150 to $200 more if the wholesaler is skilled. In wholesale, however, Gallub cautioned that a mix is important. "Don't give the wholesaler only the high mileage vehicles. Give him a good mix of the cars, and he will be able to do his best."
The Leasing Company
C.I.T Service Leasing handled the depressed market for the larger-size vehicle by telling their lessees to keep their cars in service longer to avoid the slump in the market. As John Callahan remarked, C.I.T. had 5,000 cars on closed-end, finance leases, which they normally would start getting rid of in November. But, with the worsening used-car market, C.I.T. requested lessees to keep their cars. C.I.T. also tried to sell the cars to their operators, feeling that they could get better prices from men who knew the car.
Jim Martin of Schmerler Ford, reiterated what the others had said, noticing that in his dealership there is now a 10-percent increase in fleet orders for the family-size car.
Concluding the AFLA program was Henk Bosman of United States Fleet Leasing, presenting "An Industry Overview." Instead of talking about what's wrong about the industry, Bosman stressed what is right, lauding the private enterprise system in America.
Adding to the enjoyment of the Annual Meeting was a first-day reception sponsored by the Fleet Aid Corporation; a reception and luncheon hosted by Ford Motor Co.; an evening reception sponsored by the National Auto Auction Association; and a last-day luncheon sponsored by General Motors.
September 1974 - Fall Meeting
Date: September 1974
Location: Chicago, Westbury Hotel
The following is an article that appeared in the November 1974 issue of Automotive Fleet.
The Automotive Fleet & Leasing Association Fall Meeting, held in the Westbury Hotel in Chicago, was chaired by Pierce Walsh of Warren Buick, Chicago. It was a meeting that had something for everybody.
The sparks started to fly when Paul Valentino, Manager/Transportation, Universal Oil Products, presented his address entitled, "The Catalytic Converter and Gas Pains." His company has long been involved in the research and refinement of catalytic converters. Valentino also indicated that UOP has long advocated that lead-free gas is the way to go.
The objective among citizens and organized groups today, Valentino said, is, in its simplest form, to let us use our energy resources in a most prudent manner and concurrently provide for our minimum contamination of our environment. The prudent use of energy and minimum pollution are not incompatible. The recent gasoline shortage points us clearly to the misuse of our petroleum resources. For several years, newly produced automobiles have been uneconomical with respect to gas consumption. This has been primarily due to lower compression rations, excessive leaning out and greater retardation of spark, as well as to an increase in average vehicle weight. Not only have the new cars been uneconomical with respect to gas mileage, but they have also exhibited poor power response and driveability. When catalytic converters are employed, as they for the 1975 models, better mileage and better driveability will be experienced.
A panel consisting of Chris Edmonds, Manager, Chicago Public Relations, General Motors; Chris Graveline, Product Manager-Gasoline, Amoco Oil Marketing; and James Sakolosky, Chief of Fuel Section, Environmental Protection Agency, was then questioned by Valentino after they gave short talks on the catalytic converter and unleaded fuels.
One of the more interesting questions presented during the session was to EPA's Sakolosky. It was concerned with the circumstances in which it would be permissible for a station operator to enter leaded fuel into a converter-equipped car. Sakolosky explained that in an emergency situation (car out gas), it would be permissible for an attendant to fill with only enough leaded gas to get the person their destination, or the next station with unleaded fuel.
Another question was presented to Amoco's Graveline. It asked what percentage of Amoco's total output of gas in the first-half of 1975 was projected to be lead free? The statistics were not immediately available from Amoco because they project for a whole year, not six months. Later it was learned from an official from Amoco that 22-percent of their total output was projected to be lead-free fuel.
The AFLA luncheon hosted by General Motors Fleet Section had as its guest speaker The Honorable Michael J. Howlett, Illinois Secretary of State. His address on highway safety delighted everyone in attendance.
The afternoon session started with "Confessions of Car Wholesalers," a panel discussion about the wholesale business.
Frank Farendorff of Gambles C & M Leasing then gave a detailed presentation on "Condition Reporting & Assessment As 'The Price is Right.' " His presentation was followed closely by a mass condition report of an automobile parked directly in front of the hotel. After a comparison analyses, the auto was then auctioned off by Jimmy Franks of Arena Auto Auction, Chicago. The car was bought by Arthur Iverson of Albany Auto Sales, Chicago, for $2,345.