The 1981 model year is the year that Chrysler hopes to turn the corner and return to a position of strength and leadership in the automotive industry. The key to this recovery is the company's long-awaited compact front-wheel drive model that will replace the Aspen/Volare series, also known as the k-car. Vital to the acceptance of the vehicle in the market is the car's success in the fleet and lease industry. In order to assess reaction of the industry, Automotive Fleet had the opportunity to talk to several major leasing company executives after they had test-driven the vehicles at Chrysler's Chelsea Proving Grounds. Participating in the discussion were Meacham Hitchcock, president of Industrial Leasing; John P. Dedon, group vice president, Lend Lease; Paul Gaumnitz, executive vice president, Gambles client services, C&M Leasing; Gene Arbaugh, president of Peterson, Howell & Heather; John Salzer, president of Dresser Leasing; and Tim Hlousek, president of Leaseway System Corp.
In leading off the discussion, Meacham Hitchcock said he was pleased with what he saw. "I'm impressed, ever since I saw the pictures way back when, when I saw the cars again at NAFA and today the ride. I think they're super. They ride well, and that road (the proving grounds) is as bad a road as you're going to drive on in normal conditions. There was very little steering wheel shock and good performance.
"The thing that interested me, and I'm not sure we can sell it to the drivers, is that the model with the 2.2 liter engine had manual brakes and manual steering. I didn't even know I was driving a car with manual brakes until I looked at the car's description. From a cost standpoint, if you got rid of the two power features (power steering and brakes), the car would be very competitive," he said. "The big problem is going to be whether or not people will choose a Chrysler. Are they going to have faith that Chrysler is going to be here? If the government comes through quickly and people are assured that Chrysler is going to be around, I think it's very good product to consider."
"I was impressed with the cars," John Dedon said, adding that "they drive well and they ride extremely well. I was surprised. There was much more room in the back seat than I expected." Dedon said he was riding in a two door and "I got out of the driver's seat and climbed into the back seat; I'm six-foot-two, and there was plenty of room. I think they're good cars."
When asked where he would position the cars, Dedon said, "I think they're fleet cars, especially the station wagon. It will be a good sales car. Personally, I think they'll sell every one they can make." Dedon feels that the various body styles, two- and four-door notchbacks and four-door station wagon, allow a variety of choices for fleet drivers. "For the salesman who has samples, I think that the four-door or station wagon will be an excellent car."
"I think in position it is clearly against the X-car," said Paul Gaumnitz. "It is a definite matchup there. The 2.2 liter engine will be good for primarily an urban situation, while the 2.6 would be adequate over the road. I think it's a good car. You get an indication of how well they perform because we're riding around with four big people and that's a lot of weight in comparison with just one person with some samples."
Equally impressed with the car was Gene Arbaugh. "I think it will do well. I agree with Jack (Dedon) that they'll sell every one they can make. It will be interesting to see where they price the car, because it can certainly help the Omni/Horizon, which has been drifting up in price. I think the only question is how many of them they can make and get to the marketplace; the demand is certainly there. It will be strong in the fleet market."
As for driver acceptance of the Chrysler product, Arbaugh said, "I think a certain number of drivers will select the car. The driver acceptance has been improving in our fleet in the past two or three months, Chrysler penetration has been increasing. Certainly they're spending a lot of money advertising to rebuild that confidence."
"I think that's really the key," Gaumnitz added, "the factory has got to sell."
When asked if driver acceptance of a smaller, four cylinder car will be a problem, Arbaugh answered, "No, you know several major corporations by policy have dictated they're only going to buy four cylinder cars, or cars that get 20 to 22 miles per gallon. So that's being dictated in some companies, and just the public in general is accepting that. I don't think there's any question that the fleet car of the future will be a four cylinder car."
"The only problem with four cylinder cars right now is that you can't get enough of them," Dedon said. "There certainly is not a lack of demand for them."
"I think it's going to depend a lot on how many large corporations dictate that policy of going to the four or six cylinder," John Salzer said. "You're starting to see, as you said, some of the large corporations setting a policy that you have to drive six cylinder cars and now four cylinder cars. The product itself appeared to be very good. It rides well and drives well. What will happen to that product a year from now or two years from now and how it holds up is perhaps another question. It's a whole new pattern, a whole new life now with the four and six cylinder cars."
Salzer was asked if the smaller engines and cars and the question of durability cause a change in the standard three-year lease to a shorter contract. "No, not with the lease itself, but with the term the car is in service, yes, it will be important," he replied. "You won't be able to drive 75,000 miles for 36 months, which a lot of companies do; that's the policy, 75,000 miles-36 months. They went to that when cars became more expensive. With inflation, they started to reassess and they said, 'a car is good for a lot more miles than we drive it, so we'll go to longer terms and longer mileage.' Now I think we have to go the other way because I don't think the V6s or the fours will be good for 75,000 miles."
"I think durability-wise, it's going to take us a year or two before we see what the fours or the sixes will do in fleet," Tim Hlousek commented, "Many people will come up to us now and say, 'if I go into a four, is it going to hold up?' You can't honestly give them an answer because nobody knows."
When asked how to deal with shorter replacement times versus higher acquisition and interest costs, Hlousek said, "The interest factor is obviously more pronounced than it has ever been, but if you weigh, for instance, going into a K-car now, your savings depending on what you're coming out of - say you're coming out of a V8 - there is some trade-off in gasoline dollars over the term of the lease. If you extend, you're also going to start running some maintenance costs on the eight that you're not going to have on this car. I think all of us are looking at this dilemma now. Fleets are saying, 'maybe we ought to sit on the cars we have instead of ordering because interest is 20-percent.' But we have played around with some numbers and there are some trade-offs in maintenance dollars and gasoline dollars."
"What would you rather have for resale now," Dedon asked, "a fleet of four cylinders or a fleet of eight cylinders?"
"But what would you rather have two or three years from now?" Hitchcock countered. "The old theory of looking at a six-year time span comes into play. We know from past history that you can safely run a full-size car three years and 60,000 to 65,000 miles and it's still serviceable and still saleable. It seems every time there has been a major change in philosophy, the larger car has taken a beating. When the Valiants, the Falcons and the Comets came out, the larger car got hit. When the intermediates came out, the large car got hit. When the Arabs shut off the oil for the first time, the large car got hit. Now they're getting hit again. But every other time in the past, it has recovered.
"My feeling is that there could very possibly be, by second guessing, a real place for the larger car in a fleet two years from now, because what is going to be left to compete with it on the used car market?" he asked. "The retail low mileage (large) car that was competing with our high mileage fleet cars before isn't going to be there. The mother and the father with three kids and a boat or house trailer aren't going to disappear; they may be in that market."
"I think it's a question of how big that market is going to be," Gaumnitz noted, while Arbaugh said, "I think what you want to have is a mix of cars, certainly a percentage of fours and a percentage of sixes."
"This is what we've preached for years," Hitchcock said. "You no longer can have one type of car for the entire fleet. You have to tailor the car to the territory and tailor the car to the use."
"I think that is a very important point," Salzer said. "The automobile has to do the job for the lessee. You'll no longer have that large selection of a lot of different cars, but you will have to tailor the cars to the job. If the leasing company is going to do the right service for the corporation, they will dictate policies that will tailor the vehicle for the job. If you need pickup trucks, you're going to have to drive pickup trucks instead of a car or a van instead of a car."
Salzer said he sees Chrysler's K-car meeting a lot of these needs. "There are a lot of people who do not need more than a four cylinder car on their jobs. They don't have to haul around a lot of parts or samples. There are a lot of executives and managers in many corporations who do not need V8 engines in the biggest car they can get. With the waste of fuel and the cost of the vehicle, they really don't need them. Corporations may have to change their policies and say, 'You're going to drive that car because that's all you need to do the job.' "
"One thing you can do in going down in size like that is doll that smaller car up a little bit, which we have recommended," Hlousek said. "If you're bringing a guy down from an eight to a six, give him an AM/FM stereo or power window or whatever, just to make it a little more attractive."
"I think you have to do that not only to satisfy the driver, but to help resale as well," Gaumnitz said. "It's very, very difficult to sell a 'Plain Jane' car. Because when you sell one to a broker, he's burning in whitewall tires, he's getting some cheap wheel covers, pin-striping, putting on bodyside molding, he's making it a car. You see an old fleeter go in and then see it later sold on the auction block, there's a big difference. So, by putting those things on the new car, you're keeping the driver happy and the net effect is that you get the use of that car."
"On tailoring the car to the need, I think one of the big things that Chrysler is going to have with this K-car is that wagon," Hitchcock said. "We've got fleets where the service men are out with oscilloscopes and big test gear you can't put into a Malibu trunk. It just won't fit. You've got to go to a wagon." Hitchcock said an attractive feature of the wagon is a security shade that can be drawn from the top of the rear seat back across to the top of the tailgate. "With that windowshade operation, which is easy to use, you can hide things underneath it and have some good load space back there. I think the wagon can become a good fleet vehicle, not with heavy service equipment but for light electronic service."
"I think that will be one of the big changes in our industry this year." Arbaugh predicted. "For years we shied away from wagons because they had bad resale value, high maintenance costs. Now with the downsizing programs, I think we're going to see wagons put back in fleet. You have to expect the resale value on these wagons two or three years from now will be super. It's going to be what people are going to have to buy if they want any size."
"I think it may fill the void Meacham was talking about, with the person with three children, a boat and this type of thing," Gaumnitz said. "They will get a small wagon. Then they don't get burned too badly from the economy side. Chrysler, I think, is in good shape because there's really nothing that can compete with that size car (the K-car wagon)."
"While the Escort is a wagon, they call it a five-door because they don't want to call it a wagon," Hitchcock said of Ford's upcoming front-drive replacement for the Pinto. "It's small."
"It's much smaller," Gaumnitz said. "The Fairmont wagon I think would be the closest (to the K-car wagon). But GM doesn't have anything that close." When asked about the GM five-door X-car, he answered, "Again there is a big difference in space. I haven't looked at the dimensions, but at least the perception, I would assume there is much more space" in the Chrysler wagon.
"I think Chrysler has a real opportunity," Arbaugh said. "If they can bring this car to the market on a timely basis, build it with quality, I think they will be assured some viable years."
"I think the key is for the factory and the dealer body to really convince the American people that they're building a good car," Gaumnitz said. "The Omni/Horizon is an excellent car, but I don't think the message has gone out that it's a well-built car. It's still the old image of getting into them and the handle falls off the door and it rattles and shakes."
Looking at the near-term future of the fleet car, and what is in store for drives, Arbaugh said, "I think the GM X-car is kind of the standard-bearer of the fleet car of the future. The K-car matches up to it perfectly, much better than the Ford product."
Dedon agreed and said that "the four cylinder, front-wheel drive car will be the dominant car in America while other cars will be used for specialized purposes." As for the mid-size car, "That may be the biggest thing available for specialized use."
"I think this year we'll all buy a large number of Malibu-size cars, but we have a new factor - availability," Arbaugh said. "Suppose we all decided that we are going to buy 'X-K' type cars, the manufacturers can't meet the demand. This is where the threat of foreign manufacturers comes in. Suppose all of our clients decide they want four cylinder cars and Detroit can't produce?"
"That was a big problem last year," Gaumnitz said. "I know that's one thing that we came up will very strongly last fall and said, 'hey, they're wonderful cars, but if you can't get them, what's the use?"
While GM plans to go front-drive with its mid-size A-body cars by the mid-80s, Arbaugh does not see a trend back to larger cars. "The change I see is when GM comes out with the front-drive J-car (Monza-Sunbird). It will be a hot fleet car. With the price of the cars going up as much as the price of gasoline, the awareness of all companies on costs, I think downsizing will continue. I think the J-car will be just as hot a fleet car as the X-car was. There certainly will be a big demand for it."
"We'll be right back into the availability problem, all along the line," Hlousek said.
"I guess you could take the position that maybe in the 80s, the market could revert to the 'full-size' car which is really nothing more than the intermediate size car today," Gaumnitz ventured. "People have argued that theory, although I don't subscribe to it. If they produce that kind of car, will people jump back into it? I don't think they will, because I think corporations are realizing how much they are spending. They're finally looking at it. They look at all the money they spend to operate their fleet, and that's a lot of money. If you have to look at it from an after-tax standpoint, or take the relationship of how many sales dollars they have to generate to offset that expense, if they bring it down to that level, it's a hell of a lot of money.
"I think the whole issue of costs, and what a corporation has to look at, comes down to the fact that they have an asset out there - a sales tool or whatever you want to call it - and you have to maximize the utility of that asset. So what you want to do is to get into something that is going to give you the best return. As soon as they start looking at it in that light, which they are, you're going to see a dramatic change. In the retail market, the people are going to smaller cars, and the retail buyer is also the fleet driver. So if that same person would go out and buy a car, they're going to buy a small car."
Hitchcock agreed and said that he doesn't see fleets moving readily back to larger cars, even if they are downsized, repackaged and use front-wheel drive. Looking back to when cars had wheelbases of 125 inches, he said fleets weren't putting their drivers into top-of-the-line large cars, but rather would opt for the next model down the line. "I suspect now the biggest car we're going to have on the road is going to be a Granada/LeBaron sized car," he said. In that case, those models would be considered the top of the line and "therefore, they'll stay down here (compact K-cars)." The only way fleets would move back to larger vehicles would be if the next generation of large cars was to feature technological improvements that allowed these vehicles to get better mileage than the current front-drive compacts. "If the bigger car comes out with decent gas mileage, I think there would be some pressure to move back again on tailoring the car to meet the need."
Indicating the one fleet car for all is a thing of the past, Gaumnitz said, "You have to fit the recommendations to a specific need. You can't even necessarily go into the same industry and provide the same car across the board because, again, every company's philosophy is different. So you have to look at it from that standpoint."
"Even within the same corporation, you have so many different uses that within that corporation," Salzer said. "One division is manufacturing, another division is for service and sales, so you have many different uses. You can use a smaller car, a lighter car for a particular driver, but you might have to use something heavier or go back to a truck or a van in another application. You just can't blanket them anymore."
"The biggest resistance that I see is the problem of the status that has been applied to the car as part of a job," Hitchcock said. "How do you give a new salesman in Odessa, Texas a bigger car than the senior salesman in Philadelphia, unless you really dress up the little cars. That's what I see, a lot of very flashy little cars. That's why the specialty two-door coupes were so popular, such as the Regals. In addition, the driver could say, 'I'm driving a Buick.' This will be the same thing. I also think it was smart for Chrysler on the K-car, as compared to the Omni/Horizon, to offer more of the bells and whistles. I think one of the drawbacks of the Omni and Horizon was that you couldn't dress up the car. There was very little that you could do, no tilt-wheel, no power locks, no cruise control. This K-car has all the goodies that you'd want, which would be a good way to even things out."
Gaumnitz feels corporate policy toward vehicles will go beyond merely downsizing. "I think some companies are looking at, I would assume, the way they sell or merchandize their products. I see a lot of people taking a hard look at whether they have to carry a lot of samples or not. Rather than having huge display kits, maybe they'll use visual aids or things like that. It may open up another area of marketing from their standpoint. It's got to cost them a lot of money to develop those samples, and if they use visual aids and some other things, it's going to save money on that front, plus give them the option of going to a smaller vehicle on the other front."
As for their recommendations for the 80s, Hitchcock said the K-car fits in with their fleet plans. "As we've been saying for years, tailor the car to the job, and that certainly puts these cars right in with the Xs. It's an ideal car for it."
"We're recommending the smallest car that will do the job," Dedon said. 'That's the only way you can do it."
"I second that," Gaumnitz said. "That's all you can really say. You have to get into the smallest car. I don't think people should be afraid of the four cylinder - I think we brought up the point earlier - whether or not they will survive past 50,000 miles. Well, I think there's been some history. If you look at Pinto-type cars, for example, and especially utilities that use a lot of them, they run those cars 100,000 miles. I think the engine's been proven, I think it's just an adjustment people have to make. Realistically, on maintenance, if people could just get into the pattern of changing their oil frequently, I think they'd have fewer problems."
"We'll advise our clients to downsize a portion of their fleet so that they have a mix of four cylinder and six cylinder cars." Arbaugh said. "We'll make some specific recommendations on how they should do that through job-related and mileage factors. We like a mix of cars."
"One thing in addition that we'll be doing," Gaumnitz added, "is telling people to plan early to get the cars ordered this summer if they want any chance of getting them."
"I don't think we have any choice but to recommend to our customers to look at the future and look down the road and see what is going to happen with the government controls and the oil situation," Salzer said. "There's nothing else left to do but to recommend smaller cars in the fours and sixes to get the job done. You have to look at the cost of the car, which keeps going up, you have to look at the cost of money."
"We're doing the same, recommending the downsize car," Hlousek said, "but fitting the car to what the driver has to do. I don't think anyone can lose sight of that. The corporations are looking at it from a cost standpoint." Selling smaller cars and cost control have become easier because "everyone has become a lot more sophisticated in the industry, on the fleet administrator's side, the lessor's side and the manufacturer's side. The majority of fleet administrators are pretty aware of what is going on, and their corporations are making sure they are aware of what is going on. They are attuned to what they have to do. I think a lot of pressure that could come up (against downsizing) will be resistance on the driver's part. Again, there are ways to overcome that along the way."
But all is not doom and gloom for the drivers. "With these front-drive cars, they are cars that the driver will enjoy driving," Hitchcock said in summation. "Compared to just downsizing them into a small rear-wheel drive car, these cars drive better, they handle better, they corner well, they ride well and they pull through snow. It is the car of the future."