Will new products, like this one debuting in Geneva, help revive Bentley sales?
From luxury buyers worried about presenting the wrong image to hip Gen-Xers struggling to make their rent, never mind a car payment, the worsening economic crisis is leaving no automotive stone unturned.
Brands that long seemed immune to recession are reeling, lately, responding to slumping sales with various blends of incentives, production cuts and job reductions.
Among those affected are Mini, the British brand that has long struggled, if anything, to meet market demand for its iconic mini-compact, and Bentley, another U.K. maker that, in recent years, has become the biggest player in the rarified ultra-luxury segment.
Mini is counting on its new Open to re-open the market
At the beginning of March, Mini parent BMW has announced, it will sharply trim production at a plant in Oxford, dropping one of three shifts and cutting from a 7-day-a-week schedule to five. In all, 850 jobs will be eliminated. Meanwhile, Bentley will make a “voluntary release” of 220 workers, following earlier cuts of 230 jobs. The luxury marque also is putting in place a 10 percent pay cut for everyone from janitors to CEO Franz-Josef Paefgen.
The two makers underscore how quickly the industry’s sales situation has worsened. Through October 2008, Mini’s global sales actually rose 10.5 percent, year-over-year. But in January, volumes were off 34.5 percent.
The numbers aren’t very good for Bentley, either. It saw sales plunge from a worldwide record of 10,014, in 2007, to just 7,604, in 2008. And the situation hasn’t improved since the start of the New Year. Bentley, analysts suggest, is a victim not so much of tight cash among ultra-luxury buyers, but of perception. “I’d have a hard time driving up in a car like that after laying off a couple hundred workers,” said analyst Joe Phillippi, of AutoTrends Consulting.
The British marque, the premium subsidiary of Volkswagen AG, isn’t alone, by any means. Virtually every high-line brand, from Mercedes-Benz to Rolls-Royce, is feeling the heat during this fast-cooling market. And while Bentley early on made a conscious decision to slash production, rather than build up dealer stocks of unsold cars, some other ultra-luxury brands, such as Aston Martin, have been forced to launch huge incentives to help their overstocked dealers.
Among the rare exceptions is Ferrari, which saw revenues surge 15.2 percent, in 2008, to 1.92 billion Euros. But actual unit sales were up a modest 2 percent, and where the company’s sleek sports cars long had waiting lists of two years or more, potential customers can often walk into a Ferrari showroom, these days, and drive off with a new car, if they have the cash in hand.
“The economic climate in 2009 still remains very uncertain as the crisis takes its toll across the globe and it is hard to say how the situation will develop from here,” said Luca di Montezemolo, Ferrari Chairman, last week.