"Things do not look good. The economy's gone south, we're at war, people are out of work. In fact, George Bush Sr. picked up the newspaper and thought, 'Hey, I must still be president.'" You may have gotten a chuckle out of this Jay Leno joke, but if you think about why it's funny –– because it is extraordinarily close to the truth –– then it's not so funny, is it? I don't know about you, but I'm having a flashback to the days when the first President Bush didn't even know the price for a gallon of milk or a loaf of bread. His lack of sensitivity toward the voters' plight spawned the 1992 Democratic mantra, "It's the economy, stupid," and ensured that he would be a former president sooner than he wanted.
With 70 percent of Americans thinking we've slid into a recession already, there is an underlying uneasiness in consumer confidence that cannot be ignored. With high unemployment, weak spending, rising inflation, a housing crisis, a volatile stock market –– we don't need to wait for the government to officially chime in with a "Declaration of Recession."
But do we in the aftermarket need to worry? Isn't the aftermarket supposed to be recession-proof, or at least, recession-resistant? According to a survey conducted by the Motor & Equipment Manufacturers Association (MEMA) of its supplier members, the 2008 business outlook is "less than rosy, with some pockets of optimism." Bob McKenna, MEMA president and CEO, says that the general pessimism among members is somewhat balanced, because one-third of the association's members expect conditions to remain unchanged. Moreover, he says one-fifth of those surveyed say they're optimistic, at least for their own company. "Given the generally negative economic forecasts for the full U.S. economy in 2008, it is a testament to the resilience of our industry that our members' outlook is as positive as it is," McKenna says.
Our own Wall Street columnist and senior vice president of BB&T Capital Market Equity Research, Tony Cristello, is even a tad more hopeful. In his column he says unless gasoline reaches $4 a gallon, the aftermarket should see some improvements this year due to consumers finally taking care of the maintenance they have been deferring.
My own feeling is that if there is going to be a decent year out of the next three, this is it. Most of the economic indicators that are sliding downward should be held in check during this presidential election year. To that point, members of Congress will try to help their parties' candidates by passing an economic stimulus package designed to spur spending. Most likely, the package will be based on tax rebates. And if we want to benefit from these rebates, we need an all-out, industrywide push to persuade consumers that now is the time to take care of their vehicles.
No matter what else happens this year, we will have to pay the piper in the near future. For the long term, gasoline prices can only go up — as they did by 30 percent in 2007, according to the Capstone Financial Group. We may not see another 30 percent increase this year, but with signs such as the Saudis recently denying President Bush's request for an increase in oil production, the threat of a full-blown oil crisis looms. Throw in the war in Iraq and Iran threat for good measure.
If that's not enough to worry about, there's a bigger problem to deal with: the collapse of "The House of Cards that Subprime Mortgages Built." We are at least five years away from straightening out this disgraceful national tragedy.
In light of all this, your tendency may be to go to the bunker and watch to see how things unfold. That would be tantamount to consumers hiding their savings under their mattresses. Of course, caution needs to be exercised –– you just can't be consumed by it. "It's the economy, stupid" is only in play for those who choose not to play. Just ask the first President Bush.
Larry Silvey, a 25-year veteran of the automotive aftermarket, is editor-in-chief of Aftermarket Business and Editorial Director for the Advanstar Automotive Group, which consists of Aftermarket Business, Motor Age, ABRN and Styling and Performance.
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