Luxury's rough ride: High-end brands trail overall market

Friday, February 20, 2009

Luxury's rough ride: High-end brands trail overall market
by Christine Tierney / The Detroit News

Daimler AG executives may have thought they had escaped the brutal economics of the mainstream auto market when they got rid of Chrysler in the summer of 2007.
But a little over a year later, Daimler and other luxury carmakers are struggling in a downturn that has buffeted the fanciest nameplates as severely as the rest of the industry.
Daimler reported this week that its Mercedes-Benz Cars division lost $460 million in the fourth quarter of 2008 and it forecast lower Mercedes sales for this year. Moody's Investors Service lowered its outlook for Daimler and said it may cut its credit rating for BMW, citing concerns about the companies' profitability.

In contrast with past recessions, this slump is hurting many wealthy people who usually ride out economic ups and downs.
"This recession is one that is not respectful of social class," said Johan de Nysschen, president of Audi of America. "It's one that's cutting very deeply at all layers of society."
Many premium car buyers work in two of the economy's most troubled sectors, banking and real estate. People with big savings have seen a steep erosion in their personal wealth -- and that hasn't bottomed out. Last month was the worst January on record for the New York Stock Exchange.
In the United States, traditionally the most lucrative auto market, Mercedes sales plunged 42.9 percent and Cadillac sales slumped 42.5 percent in January, compared with the overall market's 37.1 percent drop. Bentley sales were off 74.7 percent, while Porsche's fell 36.1 percent.
While the declines reflect the severity of the recession, auto executives and analysts say underlying trends are aggravating the downturn in luxury car sales -- and they worry those may persist well beyond the recession.
One is a newfound austerity that appears to be a backlash to the conspicuous consumption that characterized the booms of recent decades.
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