Collector Car Market Review

Charity sales, Arizona Madness, Chrome Rules

2010-11-22T20:44:00.000-05:00

Charity Cars
One of the trends in the collector car auction world that we’ve seen developing over the last several years is the increasing number of charity cars that are sold at major, high-end auctions. Usually the auction house waives all fees for the buyer and seller, allowing for the full proceeds to go to a worthwhile cause.

One side-effect of these charity sales is that because they don't represent a true market sale, they skew the sales data coming out of the sale in which they are sold. These sales are not a strict market transaction between a buyer and a seller for a specific good or service, as two other factors weight heavily in the sale: altruism and tax benefits.

Altruism is an important part of society, and it is nice to see at these high-dollar auctions, which can, let's face it, often devolve into a grand display of ego and pointless excess. Tax codes assists this behaviour (even with recent limits), as it makes the effective amount of the sale less for the buyer than the actual purchase price of the vehicle.

Most importantly--regardless of the motivation of the participants--good causes receive much needed funds. Still, we feel that the prices realized in these sales are not market reflective, and as such we will begin breaking them out of our auction sales analysis starting with 2011 sales reports. Comments and opinions on this are welcome.

Here We Go Again
Arizona in January is just around the corner. The hype is on, the glitz turned up and the game afoot. All eyes turn to the desert for a whole month of collector car mania.

Paradoxly, the month that had been considered a bellwether for the coming year has ceased to be so. According to our market analysis of sale data, results at the most publicized events have become less of a barometer for the coming year’s market for most models, with a correlation coefficient slipping below zero.

For people truly "in the hobby", the primary motive for going to Arizona these days is to sell cars, or to just enjoy the atmosphere. Undeniably though, the show is a blast.

Detroit was Right. Chrome Rules.
It seems that Detroit was right after all. Europe and Japan have fallen for chrome, and hard. Many of the current crop of imports have enough chrome and brightwork on them that they'd look right at home parked next to an Eldorado Biarritz in a GM Motorama. Take that, Road & Track!

From the Archives: Impending Doom: Sit Down with Dean Kruse, Fall 2009

2010-11-22T20:32:00.001-05:00

December 2009 issue of Collector Car Market Review

As we get ready to go to press, we have just returned from Auburn, IN, home of Kruse International. To say things were "touch and go" for Kruse the week before Labor Day weekend would be an understatement. In a last minute court-hearing, parameters were established for how current and past consignors (who were owed money) and creditors would be paid. Let's just say that if a deal hadn't been reached, the weekend would've been a disaster.

Right out of the gate, Dean Kruse acknowledged that his company owed a lot of people money. He also pointed out that there were lots of people who owed him money, but he didn't make that an excuse. "The economy really hit a number of my clients," Dean Kruse said. "Some of these people have been loyal and good customers for 20 to 25 years and more. We all got hit by the economy, but I am a survivor, and we have faced other hurdles in our history. We will get everyone paid off and the Fall Auburn sale will see to that."

The last minute agreement called for Kruse to place all funds received from this event into a special account. Sellers were to be paid as soon as possible; many consignors who had sold their cars left with checks in hand. Auction expenses were to be paid next, followed by the mortgage holder for the Auction Park plus other creditors, mainly past consignors. To help bolster the fund to settle these debts, Dean Kruse offered a number of his own vehicles on the block.

There was noticable downsizing in many areas this year, except staff. First off, the number of actual cars placed on the auction block was down by a sizeable amount, possibly 900 vehicles total. There were still five days of full-out auction action, plus one day of collectibles and another of just reruns for a total of seven. Many felt that the reason for the drop was the rumors about not getting paid, and while this did have an effect, the economy undoubtably was a factor, too.

In addition to the auction, Kruse Auction Park also hosts a swap meet and car corral, which is a big draw for attendees. This year, both of these events were smaller, but not due to fear of not getting paid as all transactions here are private deals between the sellers and buyers. We did notice several consignors in auctions past displaying cars for sale in the corral rather than on the auction block.

At the close of the sale on Labor Day things were looking a bit cheerier. Dean wore his trademark smile and his wife Kristen was by his side, as she has been throughout this ordeal. Most importantly, checks were being issued to creditors and consignors alike.

Kruse acknowledges that there needs to be some adjustments made to the way he has done business in the past, and promises that positive improvements are in the works. We have heard this before, of course, but this time the Rubicon was crossed, and the Empire sits at the edge of the abyss.

We were still tallying results at press time, but suffice to say that numbers were a far cry from Auburn’s glory days, when it was the most anticipated collector car event of the year.

-- Phil Skinner

Update: Kruse International's troubles continued into 2010, with the end coming abruptly. Dean lost his license for life and RM purchased Kruse Auction Park in Auburn, IN, where they held a successful sale this past September, 2010.

A World Turned Upside Down

2010-03-31T09:25:00.000-04:00

Folklore has it that a British band played that old ballad as Cornwalis surrendered at Yorktown. To the British, the most powerful nation on earth, it most certainly must have seemed that the world was indeed turned upside down. Wether in fact the story is true is secondary, for its sentiment fit the situation perfectly.

While nowhere near a paradigm shift as the American Revolution, recent events in Detroit must seem almost as monumental to the vast number of Americans that depend on the auto industry for a living, and to the nation as a whole--particularly older cititzens who grew up with an all-dominating Detroit. The fall has been breathtaking, for it happened in such a short time and was so deep that it caught everyone off guard.

We had opined here several months ago that there was a double standard being applied to the automotive industry during the government bailout process. On one hand, with little scrutiny huge financial institutions were handed tens of billions of dollars as if it were pocket change, yet GM and Chrysler were asked for detailed plans about everything. I watched many of the hearings on C-Span (ok, I’m a nerd) and they were second guessed by a bunch of Monday morning quarterbacking congressmen who’s “knowledge” of the dynamics behind the subject was obviously a mile wide and an inch deep. Perfect for TV sound bites, but useless in crafting a solution for the ongoing viability of the industry.

That’s not to say the industry was blameless, because it has a lot to account for. But it was caught up in an economic maelstrom--brought about by the financial industry, let’s not forget--that sucked in everyone, regardless of national origin. Even Toyota, always the poster child of how to do things right, has fallen right along side everyone else.

Unlike many of the simpletons in congress, I get the sense that the American auto industry really gets it this time. It has to change, and it has to look forward. That means new technology, and new realities. Do we all want to drive Suburbans on $2.00 gas? Sure we do. Do 90% of the people who buy one need to? I think you know the answer.

I hate to get philosophical on everyone, but history teaches us unequivocally that great powers that don’t adjust to changing realities do not stay great long. As the only western power to come out of World War II far more powerful than we went in, we were able to to enjoy an economic bubble of indulgence relative to the rest of the world for 50+ years. That bubble was paid for by a generation that mobilized--and sacrificed in so many ways--for a fight for survival. If anyone thinks we don’t owe a debt of gratitude to “The Greatest Generation”, they’re wrong.

Now we have our own new paradigm, so let’s roll up our sleeves and get to work. Anyone counting us out does so at their own peril. History teaches that, too.

This piece first appeared in the August 2009 issue of Collector Car Market Review.

Foundation for Detroit Renaissance

2010-03-31T09:23:00.000-04:00

"One thing's for certain, ten years from now Daimler-Chrysler will look more like an American company than a German one." I wrote those words 10 years ago, just after the announcement of the ill-fated takeover of Chrysler by Daimler Benz.

At the time I felt strongly that, despite assurances to the contrary, this was an out and out takeover by Daimler Benz. It turned out to be exactly that. A shameful sellout, really, by Chairman Bob Eaton and his merry band of bean counters. In retrospect, perhaps it was the catalyst that launched a decade of corporate greed that harkens back to the age of Carnegie, Morgan, and Rockefeller.

But at least they built something. Outsourcing, asset and market manipulation, the shuffling around of money are the “New Economy”. That, coupled with the almost criminal loosening of reserve requirements of financial institutions by our "representatives" quietly one night in 2004.

We've been building a house of cards for some time now, and anytime someone raised thoughtful objections they were dismissed--almost derisively--as not "understanding" the new economy. If the situation we find ourselves in today is the "new economy", I'd like to go back to the old one, please. Or at least remember that there is no free lunch, and that unmitigated greed at the expense of your company--not to mention the country--is the road to ruin for all.

Why all the pontification? As I write this, the Big Three are in Washington D.C. asking for loans. There is a lot of resistance, and some of that resistance is understandable. Detroit has repeatedly shot itself in the foot chasing short term profits at the expense of long term viability. But to grant a virtual $750 billion blank check to the financial institutions that were instrumental in causing this mess in the first place, and then turning their backs on a vital part of our overall economy and a critical part of our manufacturing base is ludicrous. In fact, part of the problem with the automotive industry right now is due to the financial situation of the country--which was caused by the very sector that is getting most of the rescue package!

Detroit has come a long way in the last ten years. It recognizes it's structural problems and is working hard to alleviate them. Make no mistake, they are not without blame. But their products are now competitive in every segment, quality is way up, as is reliability. Compared to other nation's automobile companies (including the transplants here which are non-unionized), they have been saddled with an uncompetitive wage and benefit structure and an endless list of legacy costs such as pensions and health care that are crushing. Even there however, the Big Three are making progress, thanks to cooperation with a more realistic UAW that recognized the impending collapse if nothing was done.

Perhaps the old adage "As GM goes, so goes the nation", no longer applies. But from the countless suppliers throughout the country to the seemingly ignored aspect of national defense, the Big Three are immensely important. For it's part, Detroit must recognize that this is a game changer. We truly are entering the new frontier of the 21st century, and the old ways will not do.

Rome is burning, and we cannot afford to fiddle around.

This piece first appeared in the February 2009 issue of Collector Car Market Review