While the automotive fleet and leasing industries seem to be enjoying good health in the midst of the resurging economy, a relapse could be in store if the federal government continues to neglect the mounting budget and trade deficits.
That was one of the most common notes struck recently at separate, enthusiastically-attended spring conventions of the Automotive Fleet and Leasing Association (AFLA), the National Association of Fleet Administrators (NAFA), and the National Vehicle Leasing Association (NVLA).
Meeting May 30 through June 2 at the Westin Hotel near historic Copley Place in Boston, some 350 AFLA registrants mixed social events sponsored by the likes of Nissan, General Motors, and Auto Driveaway with a series of instructive discussions on topics ranging from odometer and luxury car legislation to the automotive economy. By all accounts, the hit of the association's seventeenth annual conference was featured speaker Dr. Paul S. Nadler, a finance professor at Rutgers University's graduate school of management.
"The key problem affecting the fleet-leasing industry has been volatile interest rates brought on by the easy-money policies of the Federal Reserve Board," Nadler declared. "...Figuring for inflation, today's interest rates are still too high... If the dollar is allowed to drop, though, inflation is going to come back - and that remains the Fed's number-one fear."
Shooting one-liners like Henny Youngman on speed ("Did you know that outgoing AFLA president Bill McFeeters is going to Warsaw to sell Cheerios to the Poles as bagel seeds?"), Nadler warned that tax reform and a $50- to $70-billion cut in the deficit are needed now to keep the economy strong. "President Reagan has had a lot of luck," Nadler said. "But if the deficit stays over $200 billion, we'll be in considerable trouble when his luck runs out."
The economy also figured prominently in speeches by William J. Montgomery, president of Xerox Credit Corp., and Barry Bluestone, a professor of strategic research and planning at Boston College. Pointing out that 17 cents of every federal tax dollar now goes to pay interest alone on the deficit, Montgomery said the government will soon have to curb spending or raise taxes - or both. In the meantime, he urged AFLA members to track local and regional economic trends, to avoid accumulating any new debt, and to cut costs at every opportunity.
Addressing the convention them "1985 and Beyond," Bluestone predicted a future for the U.S. automotive industry that "looks extremely difficult and very rough." Elimination of the Voluntary Restraint Agreement with Japan means Big Four sales will drop from 8.3 million in 1985 to 6.4 million in 1988, Bluestone said, and a surge of imports could mean the loss of 200,000 industry jobs by 1986. The professor added that car prices will soften overall, though, with foreign-designed, American-built makes such as Honda and Mazda finding their way into more and more leased fleets.
If AFLA presentations by Dick Morse of the NHTSA and John Kelly of the Pennsylvania attory general's office are any indication, there's also a "very rough" future ahad for those considering odometer fraud. Morse said the NHTSA has now moved that crime to the front burner, predicting passage of legislation (probably H.R. 2248) this year that would require odometer disclosure on state titles and impose felony penalties.
"Everyone in this industry has closed their eyes to this situation for too long, pointing their fingers at other industry segments," Kelly said. "The states have begun to share intelligence with us now, and we're really starting to get our act together."
That brought a sharp response from Jack Corzine of California's Corzine Truck & Auto, who asked why the Feds are concentrating' on dealers when so many used-car transactions are between individuals. "The Justice Department will not accept odometer-tampering cases unless we can prove 10 violations," Morse explained. "We just can't do that against individuals, even though the remedy is there for the use of those who have been defrauded in a private sale."
Added Kelly: "Maybe dealers in California should make an example of some individuals."
The odometer issue figured additionally in remarks by American Automotive Leasing Association President Art Wolpert, who reviewed recent legislation on luxury cars, personal use, and recordkeeping, fleet incentives, the federal product liability bill, and the proposed Uniform Personal Property Leasing Act. In a behind-the-scenes look at the crafting of the House-Senate compromise bill on luxury-car limits, Wolpert disclosed that an early proposal would have imposed the luxury automobile limits on lessors rather than lessees.
"I am happy to say that that move was successfully headed off," Wolpert said. "That was in part because Congressman Pete Stark was vehemently opposed to imposing the limits on lessors. Judging from his remarks at the congressional session, this was not so much because lessors would be unfairly penalized, but more because lessees of luxury autos would not be penalized.
"I am afraid that we have not heard the last of this issue," Wolpert warned.
During a brief "president's report," Bill McFeeters said AFLA membership is up to 290, and that the association's board had voted to raise annual membership dues by $15 to $125. He later introduced the group's new president, Greg Janik, who had served as Boston program chairman and who spoke of anticipating AFLA's September meeting in St. Charles, IL.
At NAFA's 28th annual conference in the Sheraton Boston on June 2 through 5, many of the 1,327 registrants were anticipating a keynote luncheon address by Chrysler Corp. Board Chairman Lee Iacocca. The industry spokesman and best-selling author did not disappoint. Introduced by NAFA's new president, Helen Bland, Iacocca declared that the trade and budget deficits are causing America to "lose the ability - and maybe the will - to compete.
"You can't be competitive when you're burying yourself in a dung-heap of debt," he said. "And we're burying ourselves because the U.S. has no realistic trade policy... We have a 'free trade policy' when we should have a 'managed trade policy' as the rest of the world does."
Noting that America's top exports to Japan are raw materials, while Japan's leading imports are manufactured goods, Iacocca likened the U.S. to a "colony" and said that Reagan's revenue-neutral tax reform plan is a "waste of time" because it fails to address that fundamental imbalance. Instead, Iacocca called for a switch from a tax on income to a tax on consumption, as well as for a gasoline tax that would raise revenue and cut the trade deficit by curbing U.S. dependence on foreign oil.
"There's a move toward bigger cars now because we don't tax gas enough," Iacocca said. "There's more profit in bigger cars for the short-term, but it's not the right thing (policy to pursue)."
Thought by some to be an opening volley in the Chrysler chairman's political strategy for '88, lacocca's speech drew a skeptical response from Lincoln-Mercury's John Rowley during a workshop for fleet managers a short time later.
"We are lobbying as actively as we can against any tax on gas," said Lincoln's major leasing and fleet accounts manager. "Iacocca didn't mention the fact that he doesn't have a V-6 engine in the whole . Chrysler fleet. General Motors and ' Ford are selling lots of those cars, though, so naturally he says, Let's stop those guys from selling bigger cars!"
With some 30 to 40 managers from the manufacturing/consumer sector in attendance, that workshop offered a textbook demonstration of the informative, shirt-sleeve approach to fleet issues that helps makes the annual NAFA conference so valuable. Led by Robert Cavalli of Figgie Leasing, the group's discussion ranged from computer systems for maintenance and repair to IRS rules on record- keeping to fleet's interaction with top corporate management.
"Unless they have a problem, management doesn't want to hear from us," complained one fleet administrator. "They seem to feel like we're a 'necessary evil' "
"Until costs go through the roof," Cavalli agreed. "Then you hear from them!"
"I think the fact that they ignore you is actually an advantage," offered another manager. "It gives you the opportunity to set the world on fire by documenting your savings."
Turning to the anti-fleet measure currently touted by Dealers Alliance president Ed Mullane, Cavalli told the workshop that incentive legislation could impact them even more than the IRS recordkeeping rules. "If Mullane is successful, we can all effectively kiss goodbye the fleet money that is so important to our operations."
"We need both retail and fleet subsidy programs," insisted Rowley of Lincoln-Mercury. "Sometimes the retail subsidies are even more generous. The 8.8 APR program, for instance, is probably comparable in cost to what's being done for fleets."
Other highlights of the NAFA meeting were the annual fleet information fair; a legislative update by IRS official James Fields; discussions of used-car marketing, fuels, maintenance, and Canadian fleet operations; a pre-conference seminar dealing with "user friendly" fleet financing on personal computers; and the annual NAFA affiliates' meeting.
That meeting was a spirited one. Sal Crimi from Salex - the group's currently appointed president -- reviewed the Sunday evening affiliate's party, assessing it a success even though the food ran out a bit early. Crimi also noted some objection to his approval of the Toyota drive-the-car-for-a-year prize, since AMC/Renault had been the exclusive sponsor for a number of years. Fleet fair exhibitors discussed the outside-the-hotel party functions which keep NAFA members from attending the exhibit area during fair hours. And a motion carried unanimously to advise the NAFA board that the affiliates now have a maximum cap of $40,000 that they intend to raise and invest in the affiliates' party evening for future years.
Ray Smith from LMV Leasing succeeds Crimi as president and has plans for fewer exhibitor problems during his tenure, since many marketers voiced objections to the substantial cost increases for participation.
Half a continent away, the NVLA attracted nearly 500 people to its annual meeting and first "national" conference at the Broadmoor hotel in Colorado Springs, CO. Adopting the theme "Climb Every Mountain," the meeting held May 1 through 5 was the largest ever for the nine-year-old group, previously known as the California Vehicle Leasing Association and most recently as the Western Vehicle Leasing Association.
Former Secretary of State Henry Kissinger was NVLA's most formidable keynoter. Addressing a packed house, Kissinger touched on a variety of topics and then spent the evening with conference attendants enjoying a western-style steak dinner on the slope of Pike's Peak. Other speakers included Martin J. Korek, vice president of sales for General Electric Credit Auto Lease, and Ned Mundell, advisor to Orient Leasing Co. Ltd., a Japanese firm considered the largest independent leasing organization in the world.
It was announced at the meeting that a membership drive concluded on March 31 had generated 190 new members, raising the number of NVLA members to 733 in some 40 states. Hal Shallow of Goodway Leasing in Seattle chaired that drive.