J.D. Power Projects New Automotive Industry Breakeven Point to Decrease by More than 2 Million Units - Engine Builder Magazine
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J.D. Power Projects New Automotive Industry Breakeven Point to Decrease by More than 2 Million Units

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Due to cost-cutting measures such as renegotiation of union and supplier
contracts, the "breakeven point" for the domestic automotive industry
will decrease by more than 2 million units when comparing current
industry conditions to those forecasted in 2010, according to Gary
Dilts, senior vice president of U.S. automotive at J.D. Power and
Associates. Dilts shared these findings during his presentation at the
2009 J.D. Power and Associates Automotive Internet Roundtable,
currently being held at the Red Rock Casino, Resort and Spa in Las
Vegas.

Significant declines in the auto industry have resulted in lost sales
volume of more than 7 million units between 2000 and 2009, Dilts said.
This sales volume decrease amounts to a reduction of $175 billion in
net revenue, which is equal to the combined U.S. revenue of Ford and
General Motors in 2007. As a result, automakers have streamlined
operations and otherwise reduced costs, which has led to J.D. Power and
Associates’ downward adjustment of the breakeven point.

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Dilts also provided the following insights about the near-term future of the automotive industry:

• Approximately 180 new vehicle models will be introduced within the
next three years, which will require a $100 billion investment. In
addition, J.D. Power and Associates is now monitoring the critical OEM
financial metrics of each vehicle launch through our recently
introduced Financial Launch Index (FLI).

• Digital media buys will comprise 22 percent of automotive advertising
by 2011, increasing from 7 percent in 2008. More creative methods of
marketing will need to be demonstrated, requiring more effort than ever
seen in the past.

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• Technology in new vehicles will continue to increase, and customers
will demand that these technologies are easy to understand and use.

• A strengthened emphasis on fixed operations — including service and
parts visits — will be demonstrated within the next year. Service
departments will need to make a renewed effort to build satisfaction
and loyalty in order to retain customers.

• Dealerships will have a stronger process focus. Within the next 18
months, OEMs and dealer groups will be instituting programs and
branding to increase the value perception for their retail operations.

The 2009 Automotive Internet Roundtable is the most highly attended
J.D. Power and Associates conference since the event was first
initiated in 1984, with nearly 900 automotive dealers and industry
professionals registered.

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