The showroom, floored: Automakers (quietly) roll out their 2002s

After setting new sales records for four years running, the auto industry, like much of the nation, is feeling besieged.

Sales for the year were already off before Sept. 11. But the events of that day packed a punch in dollar terms.

Sales forecasts for 2001 are down almost 3 percent from before the World Trade Center attacks. General Motors announced last week it would close a factory in Quebec and lay off 1,000 employees. Ford has cut production by nearly 120,000 vehicles, and big layoffs could follow.

The effect on short-term sales is expected to be dramatic. Final sales figures for September won't be released until tomorrow, but analysts expect a drop of nearly 15 percent - from 16,400 new cars to just 14,000. Sales dropped nearly 40 percent the day after the attacks. Big incentives have brought them back to 15 to 20 percent below normal.

That's about what Boch Mitsubishi, in Norwood, Mass., is experiencing, says general manager Chuck Hart. But "there are still customers.... There's a lot of optimism out there."

Analysts probing the roots of the industry's woes are looking beyond terrorism. Some cite foolish current strategies. In Detroit's case, they say, that means banking too much on heavy, thirsty trucks, with no real plan for catering to any new shifts in consumer tastes.

US automakers "have been running blind because of the profitability of trucks," says Carl Brower, managing editor of Edmunds.com, an auto-information company in Santa Monica, Calif. "They have ignored their car lines."

He draws a parallel with the gas crunch 30 years ago, when automakers stubbornly stuck with a niche that had been working - big, V-8 powered sedans. As a result, imported econoboxes ate their lunch.

Now the public is beginning to worry about dependence on foreign oil imports, while another crop of same-old, same-old sport utilities are rolling into showrooms. General Motors alone is launching eight new SUVs for 2002.

With such a major thrust, "you know the truck market is coming to an end," says Sam Fiorani, an analyst with Automotive Compass in West Chester, Pa., referring to the widely held view that GM is a latecomer to automotive trends.

GM hopes the use of big incentives and increased production will gain sorely needed market share and restore its credibility as the rest of the industry dips. That means great deals for consumers.

Mitsubishi is offering zero percent financing, with no money down and no payments for one year. Toyota, Ford, and GM are offering the same financing and big cash rebates. Mr. Brower cites the $5,000 and $7,000 dealer incentives on Cadillacs as the largest he's ever seen.

"Zero percent is really a great deal," says Jim McPherson, author of the forthcoming "AAA Auto Guide to Buying or Leasing a Car." "The only thing they can do after that is to pay you to ... buy the car, which they're also doing now," he says, referring to small cars that automakers often sell at a loss to meet federal fuel-economy averages.

But watch out for limitations on car-buying incentives. Take Mitsubishi's "zero interest, zero payments for a year" offer, for example. After that year, the interest rate kicks in at 9 percent.

So an offer of, say, 2.9 percent that begins immediately might well a better deal, depending on the term of the loan.

And don't think you can get a deal on everything. This year's hottest cars, such as the Ford Thunderbird, will still sell at a premium.

Certainly, if you're looking for a mid-size sedan - a Chevrolet Impala, or maybe a Mazda 626 - this is a great year to buy.

And not all the fancy new offerings are heavy SUVs. One glimmer of environmental hope is the revival of hatchbacks and the continued rise of sporty, tall wagons - even if they're disguised as SUVs, hatchbacks, or sports cars. The most fitting examples of that breed are the Pontiac Vibe and Toyota Matrix twins (see reviews, page 17), economical four-cylinder wagons.

From a production standpoint, the Vibe replaces the Chevy Prism, a cheap but perennially slow-selling car. (The Matrix is a true newcomer to the Toyota lineup.) Both companies have finally realized that if you want to sell inexpensive cars to young kids - and attract them to your pricier products later - you don't try to sell them boring sedans.

Likewise, Ford is introducing the five-door Focus hatchback to the US. Lexus is offering the five-door "SportCross" wagon version of its youthful IS300. BMW, Mercedes-Benz, and Volkswagen are also offering small wagons, and Mercedes is introducing its first hatchback (see page 17).

These vehicles can provide the utility of an SUV, while offering better gas mileage and safer handling. They also could bring the auto industry back to prosperity. That, and optimism.

"The great unknown is what this war [against terrorism] is going to mean," says Bill Seltenheim, an analyst with AutoData in Woodcliff Lake, N.J. "But once we get through this period of mourning," he says, "we will get back."

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