Executive had a chance to sit down and discuss with Cesar Aoun, the car group manager for Chrysler, Dodge and Jeep in Lebanon, the troubles of the US automakers and how they’re affecting the local market.
E The Lebanese automotive market experienced strong growth last year and this year’s first quarter. Considering sales figures have slumped in most of the world, how is Lebanon bucking the global trend?
Mainly due to the banking sector not being affected, so financing for car loans were not touched, and overall, the economy was not affected. Lebanese expatriates are also back and this contributed to moving the Lebanese economy. Comparing 2005 to 2007, when there was political instability, explosions and bombs, after the Doha agreement [in May 2008], we had a great summer and a lot of tourists, so that resulted in a jump in [overall] sales. It’s all about political stability.
E Were people waiting to buy?
You can’t predict or plan in Lebanon, it’s about the situation. In May, showroom traffic was slow, not only for Chrysler, but all competitors, and we found there was a drop from the beginning of April until now, with people waiting for the outcome of the elections.
E Did the upsurge in sales pose any particular challenges for Lebanese dealerships?
By the end of 2008, and due to the world crisis hitting the sector, it increased the flow of ‘gray’ imports and used cars from the United States and the Gulf. This was a major threat to new car distributors, especially at a time of no logical link between customers buying new or used cars. From last year, there has been a 50 percent increase in used cars. It is now a fashion. Everyone’s a car dealer, with cousins or brothers in the States sending cars over. There is no control, and anyone can import. Unfortunately there is no action from the government. In effect, it has eaten into new car sales.
E What are your projections for the year ahead?
If after the elections there is no disorder, we are looking forward to a flourishing summer in terms of car sales. The second half of 2008 was almost exceptional after a freeze of almost two years, so if there is stability, it will be similar to the second half of last year, up by 10 percent.
E The US automotive sector has been badly hit by the financial crisis, with the Detroit manufacturers requiring bail outs and certain companies on the brink of bankruptcy. Has this affected sales of American brands in Lebanon?
When the world crisis hit the US market, the first damage was to US brands, then European and Japanese brands; all were affected by the slowdown of the US market, the largest car market in the world. But in terms of sales in Lebanon, we’ve not been affected. In fact, Chrysler, Jeep and Dodge sales have grown 42 percent in the first quarter of 2009, compared to the same period in 2008. Whenever we have a regional meeting, they are happy Lebanon is going against the trend. Everyone else is down while we are up.
E But will the brands be affected given that Chrysler filed for Chapter 11 in the US?
Chrysler started, a few months ago, with a restructuring plan and presented it to the government. By the end of April there was an agreement with Fiat, Ferrari and Alfa Romeo. Due to the bad debts of Chrysler, they decided that the best solution was a quick Chapter 11 to get rid of debts and have a new company. President Obama also gave assurances that the government will ensure warranties, and that is what consumers are most concerned about. We gave assurances in Lebanon that it is business as usual, and dealers elsewhere are still running. On the legal aspect, the Chapter 11 bankruptcy is only in the States. There was a perception in Lebanon that bankruptcy is liquidation, but in the US Chapter 11 is different from liquidation, it is about restructuring debts, and concessions by unions on labor costs.
In Lebanon, we are continuing our plans, and are very optimistic and happy that Chrysler is on the right track. The speculation of the last six to seven months is over.