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Wells Fargo, JPMorgan Wary of Auto Loans, Pack Them in Bonds

Depending whose money they’re using, Wells Fargo Co. and JPMorgan Chase Co. either love subprime car loans or fear them.

Both banks have grown more reluctant to make new subprime loans using money from their own balance sheets. Wells Fargo tightened its underwriting standards and slashed the volume of all loans it made to car buyers in the first quarter by 29 percent after greater numbers of borrowers fell behind on payments. JPMorgan’s consumer and community banking head Gordon Smith earlier this year said the bank had cut its new lending for subprime auto loans “dramatically.”

At the same time the firms are indirectly funding billions of dollars of the loans by helping companies like Santander Consumer USA Holdings Inc. borrow in the asset-backed securities market, essentially shunting money from bond investors to finance companies. Wall Street banks packaged more loans from finance companies into bonds in the first quarter than the same period last year, and Wells Fargo and JPMorgan remained two of the top underwriters of the securities.

Banks can have legitimate reasons for shying away from making some kinds of loans directly, even as they help investors finance the loans. Money managers like hedge funds have more appetite for riskier assets than a lender with government-insured deposits, for example. And the securities can be built in a way that cushions bond investors against losses in the underlying loans. But giving money managers the chance to invest in debt that banks are increasingly reluctant to touch themselves can at least create the perception that they are foisting trash onto customers, said David Hendler, founder of Viola Risk Advisors.

“Banks always say the securities are well structured. But you can’t rely on underwriters’ assumptions,” Hendler said. “They’re there to move a deal.”

Spokeswomen for Wells Fargo and JPMorgan declined to comment. Wells Fargo’s stock has declined 1 percent in 2017, while JPMorgan has advanced 2.5 percent.

Investment banks took heat after the 2008 financial crisis for bundling debt into bonds that later soured. The six largest banks have set aside more than $46 billion to buy back bad mortgages since the crisis, according to Bloomberg Intelligence’s analysis. A U.S. Senate subcommittee report in 2011 said that “investment banks were the driving force behind the structured finance products that provided a steady stream of funding for lenders originating high risk, poor quality loans and that magnified risk throughout the U.S. financial system.”

Smaller Risks

The risks to Wall Street firms from subprime auto bonds are smaller. Big banks provide lines of credit to finance companies that make subprime loans, but these tend to be a small part of major firms’ balance sheets. The auto loan bond market is much smaller, too: there were just $192.3 billion of securities backed by auto loans, including prime and subprime, outstanding at the end of March according to the Securities Industry and Financial Markets Association, compared with around $8.9 trillion of residential mortgage bonds at the end of last year. 

Banks might not get hurt much by subprime auto securities, but for investors who buy them, the risks are growing. Subprime borrowers are falling behind on their car loan payments at the highest rate since the financial crisis. General Motors Co. expects car prices to drop 7 percent this year and auto lender Ally Financial Inc. reported last month that prices fell that much during its first quarter, so the value of the loans’ collateral is dropping. Even Wells Fargo’s analysts who look at bonds backed by car loans cautioned in March that it may be a good time for investors to cut their exposure.
At least one Wall Street bank has steered clear of underwriting bonds backed by subprime auto loans. Bank of America Corp., which bought the biggest maker of risky mortgages as the housing bubble was bursting, has consciously avoided the subprime auto bond market out of fear that its reputation could suffer in a downturn, according to a person with direct knowledge of the matter. In consumer auto lending, Bank of America focuses on prime customers. The bank paid out more than $65 billion in mortgage-related legal settlements after the crisis.

Jumping Issuance

Demand for subprime auto securities has been strong as investors clamor for debt that offers higher yields than Treasuries. Total issuance jumped to $7.1 billion in the first quarter from $5.9 billion in the same quarter last year, according to data compiled by Bloomberg. The risk premiums, or spreads, that money managers demand for three-year top-rated subprime auto bonds was just 0.27 percentage point in mid-March compared with benchmark swap rates, down from 0.95 percentage point a year earlier, around the tightest since the financial crisis, according to data from Wells Fargo.

As issuance volume rises in the bonds, Wells Fargo is growing along with the market, and JPMorgan is growing faster. Wells Fargo’s market share for underwriting subprime auto bonds was around 23.5 percent in the quarter, about the same as for all 2016, according to Bloomberg data. JPMorgan’s was 16 percent, up from 14.6 percent for all last year.

Even with overall strong demand, some investors have been skeptical and have sought to bet that subprime auto bonds will tank the way mortgage bonds did a decade ago. Losses in loans backing these securities have jumped in recent months, rising to 7.5 percent in February from 7 percent a year earlier. That’s a surprising development because the economy is in a seven-year expansion, and job markets have been relatively strong.

Withstanding Stress

Losses in individual loans may not translate into problems for bond investors, because the securities have protections built in to help them withstand stress. For example, the bonds may be backed by so many extra car loans beyond the face value of the securities issued that up to a point, investors won’t suffer losses from bad loans.

That safety for bondholders should be contrasted with the fate of individual borrowers who can get hurt by bad loans, said John Van Alst, a staff attorney at the National Consumer Law Center in Boston. 

“These bonds are designed to enrich and protect Wall Street, and only Wall Street,” Van Alst said. 

Wells Fargo decided in 2015 to limit its subprime auto lending to 10 percent of the car loans it makes, the New York Times reported. Its 29 percent decline in overall car lending in the first quarter, compared with the same period a year earlier, comes after a 15 percent decline in the fourth quarter. In January, Chief Financial Officer John Shrewsberry said, “We currently expect balances in our auto portfolio to continue to decline in the near term.”

JPMorgan’s Gordon Smith earlier this year said the bank started cutting its subprime auto lending in 2013. In 2016 it looked at its some of its auto loan exposure again, and cut further.

“Instinctively we just felt with the risk team that we didn’t like it,” Smith said.

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This Auto Stock Doubled While You Were Watching Tesla

Shares of Silicon Valley car and energy innovator Tesla (NASDAQ:TSLA) have been on quite a run. Thanks to excitement around the company’s upcoming Model 3 sedan, Tesla’s shares have risen about 75% over the past year.

Tesla gets a lot of attention from investors, and rightly so. But somewhat under the radar, there’s another auto stock that’s also been on a tear over the past year or so, and it isn’t exactly a futuristic green company: Ferrari N.V. (NYSE:RACE)

A silver Ferrari GTC4Lusso coupe.

Strong sales of Ferraris V12 models, including the GTC4Lusso, helped power better-than-expected profit growth last year. Image source: Ferrari N.V.

It took investors a while to catch on to Ferrari — and vice versa

It’s no surprise that many investors have overlooked Ferrari, given that its history as a public company is quite short. Fiat Chrysler Automobiles (NYSE:FCAU) owned 90% of Ferrari and controlled the supercar maker for decades — but that changed in October 2015, when FCA began selling its stake through an initial public offering.

Ferrari went public at $52 a share amid excitement around its exceptionally strong brand. But that excitement faded quickly, as investors became concerned that the company had no easy path to growth. Conservative 2016 guidance led to a sell-off that drove prices down to a low of $32.00 on Feb. 11, 2016. But since then, Ferrari’s shares have been on quite a run, outpacing even Tesla’s over that period: 

RACE and TSLA data by YCharts. The chart shows the percentage growth of each stock from Feb. 11, 2016, through April 25, 2017.

What changed? More than anything else, what changed was the story: Investors have caught on to how Ferrari plans to generate bottom-line growth over the next few years — and Ferrari has caught on to how to tell its story to investors. 

Ferrari needed to show investors how its profits would grow

What discouraged early Ferrari investors was a simple reality: Ferrari has long limited its annual sales to preserve the exclusivity of its brand. Investors began that Ferrari sell-off in February of last year, after the company’s 2016 forecast anticipated a tiny 3.3% year-over-year increase in shipments, to just 7,900 vehicles. With little growth in the forecast, investors lost interest. (That’s why investors love Tesla, with its seemingly limitless growth potential.) 

Ferrari was still new to this public-company thing, but management quickly caught on. CEO Sergio Marchionne pointed out that limited runs of super-high-priced Ferrari models (think seven figures) could boost profits without boosting overall sales numbers to the point of damaging the brand. And, he hinted, Ferrari could probably gradually boost its annual sales limit by a few thousand cars a year without doing damage to the brand. 

As the year went on, investors saw those themes begin to play out. In the third quarter of 2016, Ferrari’s net income rose 20% on a tiny 1.5% increase in shipments, thanks in large part to the limited-run (just 200) $2.1 million LaFerrari Aperta model. 

A red LaFerrari sports car.

The seven-figure LaFerrari hypercar sold in tiny numbers but generated huge profits. Ferrari plans similar limited-edition models in the future. Image source: Ferrari N.V.

Ferrari’s full-year 2016 results drove the stock higher still. Ferrari’s net income doubled in the fourth quarter, driving a 38% increase to 290 million euros for the full year, on just a 5% increase in vehicles sold. Its guidance for 2017 called for more profit growth: Ferrari expects adjusted EBITDA of more than 950 million euros in 2017, up from 748 million euros in 2016, on sales of about 8,400 Ferraris. 

Marchionne thinks Ferrari can nudge that annual sales number up to about 10,000 over the next few years, without significant impact on its pricing — or, put another way, while keeping supply below the level of demand. 

Isn’t Ferrari’s stock expensive now? 

We’ve seen that Ferrari has a plan to generate significant profit growth over the next several years, as long as demand from the world’s wealthy sports-car fans remains strong. But does that make its stock a buy now? 

At first glance, Ferrari’s stock is far from cheap unless you’re comparing it with Tesla. It’s trading at a little over 33 times its 2016 earnings. That’s a huge valuation for an automaker. But that’s not the whole story.

Remember that Ferrari’s forecast calls for substantial profit growth this year. Looked at through that lens, Ferrari’s shares are trading at 27 times its expected 2017 earnings. That’s still very high for an automaker — but Marchionne has argued that traditional big automakers are the wrong comparison for Ferrari. 

A red Ferrari Formula One race car on a racing track.

Ferrari isn’t just an automaker. Its Formula One racing team, Scuderia Ferrari, is a sports brand with a huge global following. Three races into this year’s season, Ferrari driver Sebastian Vettel has won twice, to the delight of Ferrari’s legions of fans. Image source: Ferrari N.V.

Remember also that Ferrari isn’t just an automaker; it’s also a luxury brand. On top of that, its Formula One racing team is one of the world’s most widely followed sports teams. Taken together, there’s an argument that Ferrari deserves a valuation more in line with established luxury brands — despite the high fixed costs of its core automaking business.

What would that look like? Well, French luxury giant LVMH Moet Hennessy currently trades at around 28 times its 2016 earnings, while Tiffany Company trades at just over 26 times last year’s result. 

Long story short: If we accept the argument that it should be valued as a luxury brand, Ferrari’s current valuation is in the right range. 

So is Ferrari stock a buy?

I think Ferrari might be a buy for an investor looking for an intriguing growth story that isn’t an all-or-nothing bet. (I don’t own it myself, but I might soon.) Ferrari will never have the upside of a moonshot stock like Tesla. But on the other hand, as a solidly profitable company with a top-drawer brand, it doesn’t have nearly the risk of Tesla: Even if its growth falls short of our expectations, Ferrari will still be a very valuable company.

What about auto cycles? With the big automakers, we worry about slipping consumer demand now that the new-car cycle is likely to be past its peak. But in Ferrari’s stratospheric market segment, that’s less of a concern. Unless there’s a severe global recession, Ferrari is likely to be able to meet its sales goals with strong pricing — meaning that the profit growth we anticipate is likely to materialize. And that profit growth should outpace the growth of the overall market. 

Ferrari’s valuation suggests that the expected growth for 2017 is largely priced in. An investor who buys Ferrari today might need to be a bit patient. But Ferrari’s profit-growth plan could make for a fun and profitable ride over the next few years.  

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Shortage of Auto Mechanics Has Dealerships Taking Action

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Auto show to open mobility showcase to the public next year

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Auto Lender Exposes Loan Data For Up To 1 Million Applicants

A California auto loan company left the names, addresses, credit scores and partial Social Security numbers of up to 1 million people exposed on an insecure online database.

The company behind the database is Alliance Direct Lending Corporation, according to Kromtech Security Research Center, which discovered the data earlier this week. It said the data was found on an unprotected Amazon server and that the data could have been exposed for up to two years.

Researchers said they found the insecure database while researching vulnerabilities associated with Amazon Web Services (AWS). “We discovered this after noticing a few exposed (Amazon server) buckets with -dev iterations. Technically, anybody could have guessed the name and put that into URL line,” said Bob Diachenko, security communications specialist with Kromtech.

According to Alliance Direct Lending’s website, the company works with individuals and auto dealership partners to help car owners refinance existing auto loans. Data stored in the cloud was in clear text, according Diachenko. He said data also included several dozen recorded voice conversations with customers that disclosed full Social Security numbers of loan applicants.

Sample data included the names of 114 car dealerships. According to Kromtech, it estimated between 550,000 to 1.1 million loan records from those dealers were exposed online. Dealers were located across the United States from California, Colorado, Florida and Massachusetts. Kromtech is the parent company of MacKeeper. It posted a report of its investigation online Wednesday.

Jaime Alefosio, president of Alliance Direct Lending Corporation, told Threatpost she was investigating the insecure server and declined to comment further. According to Kromtech, it worked with Alliance Direct Lending and confirmed the data was secured late Tuesday.

Kromtech said it was unsure if additional third parties may have accessed the data.

Privacy experts said the data in the hands of the wrong person would be a nightmare for victims. A criminal that knows the data comes from people who have refinanced their car loan and may have less than stellar credit, coupled with partial Social Security numbers, would be a dream come true.

“Things could go wrong on a variety of levels. The data could be used to phish additional data via email or phone scams. That’s not even mentioning the reputational damage to those in the database with bad credit scores,” said Adam Levin, chairman and founder of CyberScout.

The data found by Kromtech was on an Amazon’s AWS S3 server. AWS S3 is marketed as an easy-to-use web service that allows businesses to store and retrieve data at a moment’s notice. Data is stored in what Amazon calls buckets.

“The Kromtech Security Research Center has seen an increase in vulnerable AWS S3 buckets recently due to misconfigurations or public settings,” Diachenko said. “We have identified hundreds of misconfigured instances and we have been focused on helping to secure them as soon as we identify who the data belongs to.”

He said companies should consider Alliance Direct Lending’s example a sobering reminder that companies and individuals need to make sure their data is secure.

For Diachenko, this is the latest in a string of insecure database he has helped uncover. In January, he was part of a research team that found 400,000 audio files associated with a Florida company’s telemarketing efforts were stored insecurely online. In February, Kromtech researchers found tens of thousands of sensitive documents insecurely stored online belonging to a print and marketing firm.

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Tesla Restores Auto-Brakes Amid Consumer Reports Downgrade

Tesla Inc. is deploying automatic braking to its recently built electric vehicles, though not in time to spare the Model X and Model S from ratings cuts by Consumer Reports magazine.

Model X sport utility vehicles and Model S sedans produced over roughly the last six months lacked functioning automatic emergency-braking systems that use collision-detecting sensors to slow or stop vehicles before a crash. Consumer Reports said Wednesday that the lack of the feature — which Tesla had said would be available by the end of last year — would cost each model two points on the magazine’s 100-point scale.

Consumer Reports and Tesla have been through a series of ups and downs. Its testers have gone from calling the Model S the best car evaluated in 2014, to awarding an off-the-charts rating the next year, to dropping their recommendation of the car in late 2015 due to owner-reported reliability concerns. Tesla said an over-the-air rollout of the software upgrade that will activate the emergency-braking system began Tuesday.

“Tesla said they would have the software update soon,” Jake Fisher, director of automotive testing at Consumer Reports, said in a phone interview before Tesla announced the update had started. “Unfortunately, we have heard that in the past, as well.”

Investors have taken Consumer Reports’ whims seriously because the magazine has built credibility by paying for the vehicles it tests and refusing automakers’ advertising. Tesla’s stock has surged on Consumer Reports’ praise and plunged when its cars have come under criticism. The shares dropped 0.8 percent to $311.29 as of 10:21 a.m. in New York trading, valuing the company at about $51.1 billion.

New Scores

Due to the loss of points related to the lack of automatic emergency braking, the Model S now has a score of 85 and is Consumer Reports’ third-best ultra-luxury car, behind the Lexus LS and BMW 7 Series sedans.

The Model X’s rating drops to 56, ranking it near the bottom among luxury midsized SUVs, according to the magazine. Consumer Reports said it will reevaluate the scores once the automatic-braking feature is activated.

Tesla disabled automatic braking when it transitioned to new hardware in October that it said would render every one of its vehicles capable of self-driving at a later date. The company shifted its approach with advanced safety features following an ugly breakup with Israeli supplier Mobileye NV.

Automatic emergency-braking systems that work at speeds below 55 miles per hour are standard on 19 percent of cars this year, according to Consumer Reports. About 14 percent of vehicles are equipped to handle highway speeds.

The National Highway Traffic Safety Administration, the Insurance Institute for Highway Safety and major automakers signed an agreement last year to make the systems a standard feature on U.S. vehicles by 2022. IIHS released a study in 2016 that found the systems reduce rear-end crashes by about 40 percent.

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What The Hell Is Going On With America’s Auto Safety Regulation

Photo: AP

Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.


1st Gear: Do You Want To Run NHTSA?

So, believe it or not, we’re nearing the 100 day mark of Donald Trump’s fledgling presidency. Wooosh, time flies. Trump has signed a flurry of executive orders but what he hasn’t done is fill hundreds of jobs in his administration. There’s one in particular that’s pretty relevant to the auto industry, and that got some of Trump’s critics thinking: Is this guy going to appoint a car exec to run the industry’s regulatory agency?


Rosemary Shahan, president of the Sacramento, Calif.-based Consumers for Auto Reliability and Safety group, said she would not be surprised if Trump reaches out to an auto executive to fill the position of National Highway Traffic Safety administrator, vacant since Trump took office in January.

“He has a penchant of appointing people who have been regulated and allowing them to dismantle agencies,” Shahan continued. “You have all these companies who have been under investigations for safety violations recently. I wouldn’t be surprised if he appointed somebody from one of them. It would be consistent with his other appointments.”

The Detroit News notes this isn’t unusual based on Trump’s predecessors, but his critics have space to air this sort of thing because the president has, for instance, appointed a banking exec to run the U.S. treasury, an Exxon guy to run the state department, a former banker to run commerce. And… there’s no possible names for NHTSA’s top position floating around D.C.

No names for candidates appear to be circulating among industry and government insiders in Washington. Several have said it does not appear that filling the position is a high priority for the president, who has yet to make numerous appointments in the government.

But Shahan speculates on one potential candidate: General Motors Co. Chairman and CEO Mary Barra.

“He seems to be very friendly with her,” Shahan said of Trump’s relationship with GM’s chief, noting he has named Barra to a Strategic and Policy Forum that advises him on economic issues and jobs growth, and met with her in Washington on at least two occasions.

The White House didn’t want to comment to the News, but hey, if you’re interested in the job, give them a shout.


2nd Gear: Ghosn Spikes A Merger

Carlos Ghosn, man of many hustles, may have stepped down as CEO of Nissan, but the guy still holds the title of chairman at the automaker, as well as at Mitsubishi. Nissan recently announced it was acquiring a significant stake in Mitsubishi, which is set to face the cost-cutting wrath of Ghosn.


But he has heard your talk of merging the two. And Ghosn says hell no.

“Full merger is not on the table. We want Mitsubishi to reform itself,” said Ghosn, who was attending the opening ceremony of a new Mitsubishi factory on the outskirts of Jakarta.

He also said it was likely for Mitsubishi and Nissan to cross-manufacture in areas where it makes sense.

Last year, Nissan bought a controlling stake in Mitsubishi for $2.3 billion after the smaller automaker admitted to cheating on mileage tests.

It has been a struggle for Mitsubishi, but Reuters says the automaker’s studying joint production of pickup trucks in Asia, and the company’s CEO optimistically estimates it’ll have a 10 percent cut of Indonesia’s car market by 2020. If it gets there, it’ll be doing it alone.

3rd Gear: China Wants To Sell 7 Million New Energy Vehicles By 2025


China’s proposed regulation to have electric vehicles comprise a larger chunk of vehicle sales by next decade has been in the news frequently lately, and now the country’s government is saying it wants to have 7 million sold annually by 2025. From Reuters:

The Ministry of Industry and Information Technology said in a market “road map” that China’s urbanization drive and the overseas expansion of its automakers would help drive annual vehicle sales up around 25 percent from last year’s total.

Automakers in China, the world’s largest automobile market with sales of 28 million vehicles in 2016, are increasingly pushing into electric and hybrid vehicles to meet stringent new government quotas.

Sales of new energy vehicles should reach 2 million by 2020 and account for more than 20 percent of total vehicle production and sales by 2025, the ministry said. That implied annual NEV sales of over 7 million within the next decade.

Bring on the electrification.

4th Gear: Lyft Drivers Are In ‘Hell’



Uber has a toolbox of secret hacking tools with goofy codenames, and one recent revelation showed the ride-hailing giant spared no expense to track drivers for competitor Lyft. The reason? To lure them to drive solely for Uber. That particular project went a tad further than what we reported last month, and it had a funny name of its own: Hell.

Now, Lyft drivers are suing Uber over putting them there. From Bloomberg:

Uber engaged in “illegal, surreptitious, and unauthorized remote electronic surveillance” and intruded on the privacy of Lyft drivers, according to the complaint filed Monday as a class action in San Francisco federal court.

From 2014 to 2016, the spyware allowed Uber employees or its contractors to pose as Lyft customers and access the location of as many as eight Lyft drivers at one time, through their unique Lyft IDs, according to the complaint. The goal was to identify drivers who worked for both companies so they could be targeted with incentives to primarily work for Uber, according to the complaint.

Ride-hailing’s a cutthroat world, and when you take a firm stance against regulation, Hell is fair play, I guess.


5th Gear: Amazon Also Getting Into Self-Driving Cars

Last week, it was Apple. This week, Amazon revealed serious self-driving car ambitions of its own.

Amazon didn’t comment on the report from The Wall Street Journal, which cited unnamed people familiar with the project, but the newspaper said a team of about a dozen employees are serving as “an in-house think tank to figure out how to leverage autonomous vehicles.” The tech behemoth has no plans to build a vehicle of its own, according to the WSJ.



But as Automotive News notes, the company’s worked to be on the forefront of the automotive industry.

Amazon consistently has been edging into the automotive space. It launched Amazon Vehicles, a vehicle-research portal, in August; it has long partnered with major aftermarket suppliers to deliver products; and its voice-activated virtual assistant, Alexa, has made its way into connectivity systems in Ford, BMW, Hyundai-Genesis and Volkswagen vehicles.

VW is directly integrating Alexa into a vehicle infotainment system, as opposed to Alexa being connected through a smartphone.

Amazon won a patent in January for autonomous vehicles to navigate lanes in both directions, so it isn’t terribly surprising to see the company’s self-driving ambitions are expanding. But the AV field is getting pretty crowded.

Reverse: RIP Alboreto

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April US auto sales seen down nearly 2 percent: JD Power and LMC

DETROIT U.S. auto sales in April likely fell almost 2 percent from a year earlier, with consumer discounts remaining at levels high enough to threaten the industry’s long-term health, industry consultants J.D. Power and LMC Automotive said on Tuesday.

The consultancies also lowered their full-year 2017 forecast for new vehicle sales to 17.5 million units, from a previous forecast of 17.6 million.

April U.S. new vehicle sales will be about 1.48 million units, a drop of nearly 2 percent from 1.51 million units a year earlier, the consultancies said.

The forecast was based on the first 13 selling days of the month. Automakers are expected to report April U.S. sales results on May 2.

The seasonally adjusted annualized rate for the month will be 17.5 million vehicles, flat versus the same month in 2016.

Retail sales to consumers, which do not include multiple fleet sales to rental agencies, businesses and government, were set to decline more than 0.2 percent in April.

U.S. sales of new cars and trucks hit a record high of 17.55 million units in 2016. But as the market has begun to saturate, automakers have been hiking incentives to entice consumers to buy.

Fears that the U.S. auto industry has peaked were stoked earlier this month when automakers released sales figures for March that came in at an annualized rate of around 16.6 million, below market expectations of 17.2 million units.

“While industry retail sales pace remains high, it is being powered by elevated levels of incentive spending which pose a serious threat to the long-term health of the industry,” said Deirdre Borrego, senior vice president of automotive data and analytics at J.D. Power.

Excessive discounts can help sell new vehicles, but undermine resale prices.

The consultancies said consumer discounts averaged $3,499 per new vehicle sold, the highest ever for the month of April. The previous record was set in April 2009, during the height of the Great Recession.

But the average vehicle price also hit a new record for the month of $31,380.

Inventory levels at major automakers have also become a concern as sales have apparently hit a peak.

The average number of days a new vehicle sits on a dealer’s lot before being sold hit 70 in the first 13 days of April, the highest level for any month since July 2009.

(Editing by Matthew Lewis)

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These auto show hotties know way more about cars than you do

This column will be about car models and their high cost.

But not Chevy Camaros, Maseratis or even the Lamborghini Centenario.

This is about models with names like Nicole, Sara, Caroline, Meghan and hundreds more who last week wore very tight dresses and high heels and talked about one of the roughly 1,000 cars at the New York International Auto Show.

These are more than just a bunch of pretty faces. They are experts on their specific car — and are able to talk with any of the more than 1 million New York auto show attendees about chassis, thrust and any other auto part that is a double entendre.

If you are looking for someone to object to this sort of behavior, I’m going to disappoint you.

The women, as I said, are all well-equipped to talk cars — having gone to school on the technical stuff. And some guys might even be listening to what they have to say.

Entertaining the attendees is exactly what any car company worth its four wheels is aiming at. And that’s why the companies spend millions of dollars a year on these beautiful female “accoutrements.”

“It’s a great gig. It pays well,” says Meghan Tarmey, who had worked the auto show circuit for five years before founding her own New York City company called the Caddy Girls, which provides — you guessed it — beautiful caddies for high-end golf tournaments.

Tarmey says women can earn anywhere from $250 to over $1,000 a day working auto shows, depending on the brand they are representing. “The higher the price of the car, the better the pay.”

You may not know this if you are particularly New York-centric, but each year there are 66 auto shows — 41 of which are international in nature — run by Auto Shows of North America.

It’s like a traveling circus and, while some of the show dates overlap, it is possible for some models to work 18 of the larger shows during the car show season — which stretches from the Miami show in September to the grand finale, New York, in mid-April.

That’s a total of 96 days, meaning it is possible for the better-paid models to earn nearly six figures — or the price of a gently used Bentley.

Abeba Davis is another of the “product specialists” — one of the terms the auto companies insist that the women use when talking to customers (and journalists). Davis, who’s working for Infiniti, is extremely discreet about how much she makes, which is OK since I won’t tell her my salary either.

But she will say that the perks are great. In addition to bolstering her modeling and acting portfolio — which already includes Pepsi and other print ads — Davis says the car companies treat them well. “They take care of your travel, your expenses and your wardrobe.”

In the case of two models — er, “specialists” — working the Alfa Romeo display, that includes dresses shipped straight from Italian designers.

The carmakers don’t like to talk about their models (the women, not the cars) or the costs associated with this marketing maneuver.

They also won’t discuss why male models are seldom used. After all, 51 percent of attendees at the 2016 New York auto show were women.

“[The models] aren’t all women,” said a spokesman for General Motors. “We have men presenting as well.”

OK, OK. Back off. I said I don’t care.

And “we aren’t going to talk about budget,” this GM rep added. In fact, GM wouldn’t talk about anything since its auto show manager never got back to me.

But that’s OK. Others know the secrets of the women who do this kind of work.

Chris Hanna, who with his wife, Caryn, owns TSM Agency, provides a lot of “car show girls” as well as models for trade shows, auto races and anywhere else a pretty woman is deemed necessary.

Hanna says auto companies can spend thousands a week for “top tier” women for each show, especially since the models often work in teams of up to 24. Each one gets her own car — to promote, not to own— which she knows fender to fender.

“They spend a lot money on this. More than the average person would think,” Hanna says.

Just look at the TSM Agency Web site — — and you’ll not only see how above-average the models are but, more important, you’ll also notice how many women want to caress cars at these shows.

There is one blemish on this pretty picture.

While it’s not quite a disaster yet, carmakers have been having a rough spell of late. March vehicle sales fell below expectations, and unsold inventories at companies like GM are rising faster than some experts think is healthy.

While this isn’t likely to knock the car models out of their pumps, some experts think they’ll end up on a fiscal diet.

Already the automakers are using women who live in the cities where the exhibits are being held to cut down on travel costs.

And some models are sharing Airbnb accommodations because the snazzy hotel accommodations are being downgraded to three-star ones.

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Construction starting on $95M auto parts plant in Detroit

Eleven months ago, Pakistani-born billionaire Shahid Khan promised to build a high-tech factory employing hundreds of workers at a failed industrial park in Detroit.

On Monday,   the promise is one step closer to becoming a reality when Khan, the owner of Flex-N-Gate; Detroit Mayor Mike Duggan, and others are  to break ground on the $95-million manufacturing facility that will create up to 750 jobs at the I-94 Industrial Park.

The global auto supplier is to be the newest tenant at the industrial park and is committed to hiring Detroiters first, with a Detroit-based, minority-owned contractor to lead construction, the city announced in a news release Sunday.

The groundbreaking on the Flex-N-Gate facility will be held at its future site at 7000 Georgia St., in the industrial park, northeast of I-94 and I-75 interchange.

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The development is another economic shot in the arm for a city that has been plagued by chronic unemployment and, according to an article last  May by the Free Press, is to bring jobs to an area of the city with the highest unemployment.

The company has a website — — for the new facility, at which it states that it is accepting applications for professional, management, skilled trades and production.

The 186-acre industrial park has sat vacant for nearly 15 years.

The Free Press previously reported that Flex-N-Gate planned to build a  plant to supply parts to Ford and that the deal came together in just half a year’s time, in part because of the personal involvement of Ford Executive Chairman Bill Ford.

Ford owns the Detroit Lions and Khan owns the Jacksonville Jaguars, with the two football team owners having the opportunity to talk from time to time.

Duggan said in a prior article that Ford “intervened on this personally. You had the advantage of a couple of NFL teams talking to each other.”

“Building a new plant from the ground up within the Detroit city limits will be a milestone moment for Flex-N-Gate, made possible thanks to our partnership and collaboration with Ford, the City of Detroit and the State of Michigan,” Khan said in a statement last May.

Khan’s company was to commit to occupy a 30-acre portion of the industrial park, which was established in 1999.

Khan, who has been accused by the UAW of underpaying workers at factories in Texas and elsewhere, said in May that the jobs at the Detroit factory were to pay “in the mid-to-high $20s per hour.”​ The new plant, he said, was to initially create about 400 jobs with the potential of leading up to 750 jobs.

“The headline is about jobs. Hundreds of outstanding, well-paying jobs,” Khan previously said. ”The kinds of jobs that were really the backbone of the middle class and really the definition of the American dream when I came here in ’67.”

Khan has owned Flex-N-Gate for more than three decades. The company has made bumpers, plastic trim components and mechanical assemblies for Ford, but it has not disclosed what parts the company would make at the new production and sequencing facility in Detroit.

In October, the company qualified for a tax-free designation, which was expected to save it more than $1 million a year for 10 years. Earlier last year, it received a $3.5-million grant from the state to help it open the plant.

Contact Christina Hall: Follow her on Twitter @challreporter. Staff writer Matthew Dolan contributed to this report.

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