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R. L. Polk & Co.’s Ask the Industry: Predictions for the U.S. Auto Industry in 2006

With all the struggles the automotive industry has faced this past year, do you foresee a better, stronger industry in 2006 or one that is worse for the wear, and why?

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With all the struggles the automotive industry has faced this past year, do you foresee a better, stronger industry in 2006 or one that is worse for the wear, and why?

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Dave Caracci, Chairman of the Board, Automotive Aftermarket Industry Association (AAIA)

The aftermarket in 2006 should be excellent, and all the investment analysts who spoke at the AAIA Financial Symposium last September agreed. Positive demographics, aftermarket collaboration and developments in aftermarket data-based marketing are driving toward a fantastic 2006 and beyond.

Demographic trends continue to show more and more driving age people each year. Immigration, generation birth rates and extended life spans have resulted in about 17 percent more driving age men and women in the United States than just five years ago.

Collaboration between aftermarket businesses, rather than secretive competition, is resulting in better products and services offered to the ultimate customer, the vehicle owner. Just like our nation, the aftermarket is stronger and safer when we all work together instead of separately. The industry’s fight to get the Motor Vehicle Owners’ Right to Repair Act (HR 2048) through Congress has been a rallying point for aftermarket companies. From manufacturers through the distribution channel and to the service technicians, we have professionals working together to protect our industry from OEM monopoly and growing the entire aftermarket by educating drivers to better maintain and care for their vehicles.

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Data-based market research is helping aftermarket companies identify customer wants and needs, as well as discover ways to more efficiently utilize inventory and investments. Information standards, point-of-sale data collection and other recent initiatives by AAIA aftermarket committees have expanded the industry’s research opportunities. With aftermarket customer research activity reaching an all time high, companies will know more about their customers wants, needs and buying behavior than ever before.

There you have it. Put demographics, collaboration and data-based marketing together and 2006 promises to be a real winner.

Mark Chung, Director, Strategic Marketing, Yokohama Tire Corp.

I believe 2006 will turn out to be a pivotal year on many fronts, especially for domestic OEs. There is strong indication that the post-9/11 incentives offered to consumers, led by GM, has pulled ahead a lot of buyers in the buying cycle. There is equally strong indication that the “fire sale” rebates are not stimulating incremental sales but rather rapidly eroding the brand to a “bargain” status. With Toyota breathing down both GM and Ford’s neck, the marketplace will be extremely competitive as the domestic OEs will pull out all stops to maintain the lead in market share. In addition, given the recent escalation in fuel prices, the shift from larger to smaller vehicles should continue as many drivers realize they really don’t need a full-size SUV, for example.

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That said, from a macro-level, smaller, C/D size vehicles, including crossover SUVs will do just fine in 2006. If gas prices stay at current levels or rise toward the $3 per gallon mark, the migration of buyers from full-size vehicles toward smaller vehicles will accelerate. The industry, in general, will continue chugging along, consistent with recent SAAR projections.

Randy Fowler, Vice President, Sales, Penray

I believe that the entire industry will ramp up its efforts to ensure a great 2006. I would anticipate more retail chain acquisitions with stronger same store sales. Hopefully, we will not be faced with the weather situations we experienced in 2005.

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As for our company, Penray will be faced with an interesting 2006. We are positioned to aggressively expand our distribution in the retail as well as the traditional arena. We will be adding several new products to our brands and will market these products both nationally and internationally. For these reasons, we are anticipating a strong return on our investment.

John Gethin, President and COO, Standard Motor Products

At Standard Motor Products, we are fortunate that we have partnered with many customers that have seen good growth in their businesses in 2005. I have no reason to believe that 2006 will be any different. We continue to focus on our customers as our top priority and are committed to being the very best business partner possible. As a company, Standard Motor Products is ‘more than parts.’ This will be even more evident in 2006 as we build on our full service support programs, including sales, marketing and training that are second to none. We will concentrate our efforts on helping our customers build their businesses and we will do our part to make 2006 a very successful year for our industry.

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Richard Shiozaki, senior vice president, DENSO Sales California, Inc.

It is natural for negative events to capture the attention of people. However, many of these events that have occurred in the automotive industry were predicted by many analysts. The automotive aftermarket industry has more time to adjust to the issues occurring with the carmakers. We expect in the automotive aftermarket, companies will be forced to change and come through stronger. This will benefit the customers, the end users and independent service technicians, with more competitively priced parts and greater emphasis on customer service to provide quality parts and improved availability.

Summar by Amy Antenora, managing editor, aftermarketNews

One of the most fascinating, and most enjoyable, parts of compiling this feature every other week is witnessing the way in which different people, or even different companies, will interpret the same question or idea.

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Such is the case this week, where nearly every one of our respondents took a different approach in offering their predictions for the automotive industry in 2006. While each took a slightly different tack – either focusing on the smaller universe of their own company or the broader realm of the industry as a whole — all of their comments are variations on a common theme: recovery. The negative news headlines coming out of Detroit on a nearly daily basis have put many automotive businesses in panic mode. However, despite the well-publicized struggles of companies like GM and Delphi, the industry as a whole appears to be on an even keel, experts say.

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According to a recent report from Automotive News, most industry analysts and consultants are not anticipating much change for the industry in 2006. This may not be bad news, however. Automakers were expected to sell about 17 million new cars and truck in 2005 and they fell just shy of that goal. Edmunds.com Chief Economist Jesse Toprak told Automotive News that this year will be a repeat of last year, staying right around that 17 million mark, which is in line with healthy industry projections. Other analysts expect similar numbers for vehicle sales, varying from 16 million to 17 million.

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