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Inside this issue
Democrats Decry Government Overreach, Sloppy Math in CFPB Crackdown on Auto Loans
Consumers Shrug Fuel Efficiency Goals, McConnell Says
Millennial Debt, Low Spending Pose Long-Term Challenge for Industry
Volkswagen Tightens Belt at VW Brand, Profit Surges
The Rise of the Petite SUVs
Fiat Chrysler CEO Says Alfa Romeo SUV Coming in 2016
No More Price Haggling at Lexus Dealerships
Michigan to Promote Auto Jobs in New Program
Top Stories
Democrats Decry Government Overreach, Sloppy Math in CFPB Crackdown on Auto Loans

President Obama's newest regulatory agency, the Consumer Financial Protection Bureau, acted without Congress' blessing in taking away lending flexibility from auto dealers. And it did so after conducting a discrimination study that it acknowledged was at least 20 percent inaccurate because officials guessed the race of car buyers.

The move has boomeranged big-time inside the president's own party, which helped create the CFPB in 2011 as part of the Dodd-Frank banking law.

Democrats this summer crossed the aisle in large numbers in voting to rescind the agency's crackdown on auto loans. They are sounding just like Republicans, accusing the agency of doing an end run around Congress, using sloppy math and engaging in overregulation.

"The CFPB has done the dealers a massive injustice," Rep. David Scott, Georgia Democrat, declared shortly before the House Financial Services Committee voted 47-10 last week to nullify guidance that the CFPB issued in 2013 regarding car loans.

He was one of 13 Democrats to join Republicans in the vote. The Democrats argue that Congress explicitly exempted auto dealers from CFPB's regulatory oversight and that the evidence the agency used to accuse dealers of discriminatory lending was deeply flawed.

"When you get into this area of accusing someone of racial discrimination, that is a serious indictment, and no industry deserves that kind of treatment, and certainly not the auto dealers," Mr. Scott said.

The auto dealer industry has long been a powerful force in local politics and is applauding the bipartisan effort to roll back the CFPB's action.

"Having an agency swimming so far outside of the very specific lane it was assigned to by Congress is an extremely serious public policy matter, and a growing number of Democrats and Republicans are justifiably concerned about the CFPB's actions, as well as its secrecy, its methodology and its lack of accountability," said Jared Allen, a spokesman for the National Automobile Dealers Association.
Source: Washington Times
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Consumers Shrug Fuel Efficiency Goals, McConnell Says

Fuel efficiency gains are nice, but the car-buying public does not seem to be interested, a prominent Honda dealer said at the CAR Management Briefing Seminars. “You have to consider the customer’s needs, and some trump fuel economy,” said Forrest McConnell, president of McConnell Honda-Acura in Montgomery, Ala., speaking here Tuesday. Using live props, he said fuel economy mandates were like selling broccoli to customers who want low-calorie doughnuts. Among his listeners? The director of the EPA’s office of transportation and air quality and the deputy executive of the California Air Resources Board -- both of them influential voices on the industry’s mandate to hit the 2025 corporate average fuel economy target of 54.5 mpg. “In the past few years, manufacturers have been doing a hell of a job,” said McConnell, who was also the 2014 chairman of the National Automobile Dealers Association. “In 2006, automakers produced 69 high-mileage vehicle choices. Today, they produce 492. But fuel efficiency is not driving the market, he said. What consumers want are light trucks, SUVs and crossovers.
Source: Automotive News
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Millennial Debt, Low Spending Pose Long-Term Challenge for Industry

Current economic trends are positive for the auto industry as young consumers find jobs, but their low spending and debt could hurt the industry in the long run, economists say. It will take four millennials to replace the spending power of one baby boomer, Stephen Szakaly, National Automobile Dealers Association chief economist, predicted Tuesday in a speech at the CAR Management Briefing Seminars in Traverse City, Mich. The average income of millennials (ages 19-34) is significantly lower than that of other generations. On average, millennials make $34,430 a year, compared with the $50,400 of Generation X (ages 35-49). Baby boomers and the Greatest Generation combined (ages 50-87) make an average of $46,340. The national average is $46,790, according to Experian. Low millennial spending could have long-term effects on the industry as a whole, Szakaly said. “Stagnating wages for millennials, along with increasing vehicle-transaction prices, will pose challenges in the long run,” he said.
Source: Automotive News
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Volkswagen Tightens Belt at VW Brand, Profit Surges

German auto maker’s 2014 net profit jumped 20% on strong performances at Audi, Porsche, and Skoda

Volkswagen AG, Europe’s biggest automotive group by sales, has reported another slide in the profitability of its namesake VW brand and warned of dark clouds hanging over the global economy this year. The weak performance of the VW passenger-car brand took the edge off an otherwise strong performance from the rest of the group in 2014, led by luxury brand Audi, sports-car maker Porsche, and mass-market Czech brand Skoda as well as growth in China. These three brands combined to drive VW’s group net profit 20% higher to €10.85 billion ($11.50 billion) in the year to Dec. 31 from the previous year, as Volkswagen had previously reported.
Source: The Wall Street Journal
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The Rise of the Petite SUVs

There is a shift under way in what Americans want from their everyday vehicles, and few new models illustrate that as clearly as the new Ford Escape hitting showrooms now. The most popular SUVs are smaller and nimble, part of a class of vehicle referred to as compact crossovers. These carlike wagons like the Escape, Honda Motor Co.'s CR-V and Toyota Motor Corp.'s RAV 4 have attracted buyers with just enough roominess and luggage capacity, and without the gas guzzling or safety concerns of their big SUV brethren. That is a significant change from 2001, when the Ford Escape first came on the market and was considered part of a niche class of vehicle sometimes belittled as "cute utes." Now it is the gas-guzzling SUVs built on truck frames that have become the niche products.
Source: The Wall Street Journal
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Fiat Chrysler CEO Says Alfa Romeo SUV Coming in 2016

The second vehicle in the planned Alfa Romeo product assault in North America will be an SUV that will go into production by the middle of next year, Fiat Chrysler CEO Sergio Marchionne told analysts last week. The SUV will be one of eight new models the automaker plans to launch by 2018 as it spends $5.6 billion to revive the brand globally. The first of those vehicles -- the Giulia sedan -- was unveiled last month in Milan, Italy. The Alfa Romeo plan is designed to turn Fiat's Italian auto factories into an export hub for Alfa Romeo and Maserati models with higher profit margins than Fiat's. If successful, the plan will help to boost the profits of the overall company.
Source: Bloomberg
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No More Price Haggling at Lexus Dealerships

Lexus is introducing negotiation-free dealerships as a way to differentiate its dealer experience in a field where the competition has closed the gap in offering a premium experience, said Jeff Bracken, general manager of Toyota's Lexus luxury division. Bracken announced [Wednesday] at the Center for Automotive Research Management Briefing Seminars that a dozen handpicked Lexus dealers will start a pilot project where prices for new and used cars as well as parts and service have set prices that are not subject to negotiation. Dealers must be willing to let customers walk away if they don't like the set price. Bracken said he expects a dip in sales and share in the short term but that should only last a couple months until customers get used to the new pricing strategy. The idea goes back to a two-day meeting in the winter of 2013 where the company and a small group of dealers acknowledged there are customers who don't like the dealership experience, largely because of the haggling.
Source: Detroit Free Press
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Michigan to Promote Auto Jobs in New Program

Michigan Gov. Rick Snyder on Wednesday announced a program designed to get young people excited about the auto industry. "The auto industry is on a roll," Snyder said at the 2015 CAR Management Briefing Seminars. But the top priority is talent to sustain it. "We need to take a leadership position on this," he said of the need to attract, grow and retain talent among students and those already in the workforce. The initiative is called We Run on Brainpower, and the governor introduced it with an overview video highlighting the skills used in today's auto industry -- from design to manufacturing. "All those skills are required to make a vehicle." Other videos include a "day in the life" series with people in the industry showing what they do and why they decided to pursue an automotive job in Michigan. Snyder said the downturn discouraged people from pursuing work in the industry. "It was a difficult decade. A lot of people lost jobs. But it is time to get back in the industry again."
Source: Detroit Free Press
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Quotable
"I can tell you that dealers have a mission: to serve our customers by offering choices -- choices that fit their lifestyles and budgets."

   
-- Forrest McConnell, president of McConnell Honda-Acura in Montgomery, Ala., commenting on fuel economy not being a priority for car buyers, Automotive News, Aug. 5

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