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2004 European Car Sales Decline in US - 2004-04-21


Sales of European cars in the United States took a dive in the first quarter of 2004.

Some of the major names in European automaking took a hit during the January through March period, according to the Power Information Network, an affiliate of J.D. Power and Associates. "The major European brands, including Mercedes-Benz and BMW and Audi and Volvo ... those brands are losing owners to Asian luxury brands, Lexus, Infiniti and Acura," said Tom Libby, the company's director of industry analysis.

Mr. Libby added that there are two types of vehicles that are playing the biggest roles in this drama. "The two areas of the luxury market that are the biggest and also generally are growing the most are the luxury SUV [sport utility vehicle] segment and the entry luxury car segment, which is sort of, on a price basis, on the lower end of the luxury market," he said. "And owners of European models are moving to Asian models in those two segments."

Taking the biggest hit of all is Europe's number one automaker, Volkswagen. According to Power research, almost 40 percent of Volkswagen owners who bought a new car in the first quarter switched to an Asian brand.

"VW is presently struggling," said Tom Libby. "Their losses in the Jetta and Passat car lines are being offset to some extent by the strong performance of their new SUV, the Touareg. But, overall, VW is losing owners and they probably will continue to do so until their new models arrive next year and the year after."

Two issues are at work in Volkswagen's case, says company spokesperson Tony Fouladpour. The prevalence of large customer incentives as an inducement to buy; and the fickle nature of American car buyers who respond to fresh, new products.

"In an incentive-driven market, or in a market that is heavily influenced by brand-new product, Volkswagen has been affected," said Mr. Fouladpour.

After being a staunch hold-out against incentives, the company has begun to offer low interest rates to customers. As far as fresh products are concerned, they can't really rush new models to market, because that could endanger vehicle quality, already a touchy issue with a number of European automakers.

"That's the number one priority here," emphasized Tony Fouladpour. "We are disappointed with some of the IQS [Initial Quality Study] figures that we've seen, specifically from J.D. Power. Obviously, when you look at the IQ-S ratings and you see that you lag behind some of the top automakers in the industry, you want to do better."

The company has set up a 50 person team of technicians whose only job it is to seek out problems, identify their cause and communicate the solutions to company management in Michigan and in Germany where they can be quickly fixed.

Power Information Network's Tom Libby was asked if there is an exception, a "silver lining" behind the dark cloud of the European sales slide. He named a rather small company known for its sports cars.

"Porsche is doing very well this year overall, because of the Cayenne SUV, which is more than offsetting losses in their cars," he said.

And Mr. Libby predicts an American upturn for Mercedes-Benz with several new "cross-over" SUVs coming soon. So, the message seems to be: hang on until the reinforcements arrive.

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