Some people go hang-gliding. Some climb mountains. Some join the Marines.
Curtis E. McCalip Jr. opened a Ford dealership in Arlington, Va., in November -- in the midst of the worst year the auto industry has suffered since the Depression of the 1930s.
But McCalip does not consider himself a daredevil. At 61, he is a member of the third generation in his family to sell automobiles in the Washington area, and thinks he knows a bargain when he sees one. The Dick Blanken Ford agency on Wilson Boulevard was closed in June by Blanken after some business reverses, and for McCalip the price was right.
He bought the Blanken agency and reopened it last month.
By combining the Arlington agency with Northeast Ford, the dealership on New York Avenue near Bladensburg Road that McCalip's family has run since 1924, McCalip hopes to have a strong sales position inside the Beltway, from Arlington through central and northwest Washington, to Bethesda.
The question mark hanging over McCalip -- and thousands of other auto dealers -- is whether the old rules of the business still apply.
"We think this is a very profitable location. We know Blanken made a lot of money over here," said McCalip, a precise man who keeps a close eye on his business, friends say.
Talking with a reporter, McCulip seems a little uncomfortable in Blanken's paneled office, which is a lot fancier, he says, than his office at Northeast Ford. The sprawling, angled desk is bare except for a financial summary on a computer print-out.
McCulip has launched his ventrue in the face of a new upward surge in interest rates that has battered the car industry for the second time this year.
"The interest rates have everyone frightened," McCulip said. Many consumers wrongly assume that the auto loans are tied to the prime rate -- the highly publicized rate banks charge for short-term loans to major customers. The prime moved above 20 percent this month.
The auto loans offered by banks and financing companies have also risen sharply -- to near the 16 percent level reached this spring, (when auto sales virtually ceased,) and far above the 10 to 11 percent range common between 1971 and 1978.
In response, Ford and Chrysler Corp. have had to offer special subsidized interest rates to boost sales.
Ford recently announced that it will guarantee a financing rate of 12 percent on most of its cars except for the new Escort/Lynx models. To carry this off, Ford has offered banks a rebate of $300 per car if they will make the 12 percent loans. With the increase in interest rates, the $300 isn't enough to attract bank participation.
"I haven't had much luck with the banks on this," McCulip said. Instead, Ford's own financing company will have to handle the discount financing, at least until interest rates decline.
Chrysler's program offers customers rebates equal to 7 percent of a new car's sticker price -- the amount of the rebate is tied to the prime interest rate -- or $490 on a $7,000 car, for instance.
The interest rate problem is partly psychological, dealers say. Rising interest rates have a relatively small impact on monthly auto payments. As the Congressional Budget Office noted this year, a $6,000 auto loan extended over four years at 12 percent interest would require monthly payments of $158. The same loan at 15 percent yields monthly payments of $167.
There is a less obvious impact that does hurt, however. As interest rates rose this fall, banks have again taken a hard line on credit, demanding bigger down payments and looking more critically at would-be car buyers' financial statements. As a result, the refusal rate on auto credit applications has climbed again to above 30 percent, according to the National Automobile Dealers Association. The normal refusal rate is between 10 and 15 percent.
The CBO estimates that the increase in interest rates this year has cut sales of new cars by about 8 percent.
Car dealers here and elsewhere have been sustained through a dismal holiday season by the hope that once interest rates drop again, car sales will rebound upward.
But tunneling under their hopes is the worry that the market for U.S.-built cars may have changed fundamentally since 1978, the last exceptional sales year.
All the political furor over Japanese imports and all the publicity over the new U.S. front-wheel drive models has so far failed to cut the import share of the U.S. market much below 25 percent.
As for the new U.S. models designed to throw back the foreign competition, their sales appear to have been hurt by their prices.
"I don't think that any of the domestic automakers have put the slightest dent in the [market] for imports," says John Pohanka, president of Pohanka Oldsmobile-GMC Inc., who sells Hondas as well as Oldsmobiles and thus sees both sides of the question.
Stephen Brodell, president of Anacostia Chrysler-Plymouth agrees: "I don't think we're getting the import buyers."
The customers buying the Chrysler K-cars at Brodell's dealership tend to be "mature, upper-middle class" customers. Typically, they are trading in a larger, four-door American car for one of the intermediate-sized K-cars, to take advantage of the new cars' 30 miles-per-gallon performance, he says.
There aren't enough of that kind of consumer to give Chrysler or the other American automakers the good sales year they badly need in 1981.
Chrysler's bid for a larger market was tripped up, at least temporarily, by the decision to begin production of its new K-cars, the Dodge Aries and Plymouth Reliant, with luxury models.
Chrysler chairman Lee A. Iacocca acknowledges that Chrysler "started off a little steep by loading cars with automatic transmissions, stereos and air-conditioning" -- and cruise control and fancy hubcaps and other extras.
The result was an $8,000 to $9,000 car whose price tag apparently scared off a good many customers.
Chrysler's pricing strategy on the K-cars is the same followed by General Motors Corp. with its comparable line of X-cars like the Chevrolet Citation and Buick Skylark.
Anticipating that these front-wheel drive, high-mileage cars would have the greatest consumer appeal, Chrysler and GM have tried to make them profit leaders and have priced them "aggressively," as the industry puts it. At one local Chevrolet dealer, a Citation is on display with an $8,000 sticker. The year before, the same car would have sold for $1,600 less.
Chevrolet has been saddled with disappointing sales -- down 11.6 percent nationally in November, compared with November a year ago.
"I think there is some price resistance," said Pohanka, whose Olds Omega and Cutlass models are proving tough competition for Chevrolet. A typical car sale now involves a monthly payment of $200 or more. "That's a worrisome thing but, Lord, everything's high," said Pohanka.
Chrysler had to switch to simpler versions of the K-car in order to lower the cost to consumers.
"It's properly priced at this point," says Brodell. A stripped down, four-door K-car sells for $5,900 he said. Add an automatic transmission, power steering and an AM radio, and the price is $6,500. Add air conditioning, and the sticker price is around $7,000, Brodell said. But with the interest rate rebate and a liberal discount, the consumer can buy the car for less than Brodell pays Chrysler for it, he said.
The rebate will probably last until Jan. 20, he says, when the Ronald Reagan administration will take over. Brodell and other dealers are praying for the inauguration of some different economic policies that will permit a drop in interest rates and a revival of the car market.
"We'll have to conquer the interest rat problem and inflation," said Brodell, before the industry can recover. But he believes that the attrition among dealers has run its course for now; the weaker dealers have dropped out and those who survive are toughened.
It's a quiet Christmas season at Arlington Ford. The local personal property tax is assessed in December, and that puts a heavy damper on year-end sales.
McCalip is hoping that by Washington's Birthday, the climate will be ready for a recovery in car sales.
He is trying to tailor his business to changes in the auto market. Inventories are smaller, because it costs dealers one or two percentage points above the prime rate to finance the cars they buy from the assembly plants. That means the dealer must pay $100 a month for each car sitting on the lot. "You've got to be more astute in your buying and you've got to be a better salesman," McCalip said.
He will concentrate on lower-priced models with fewer options in order to reach the broadest possible market. Used cars are a big part of McCalip's strategy, and he has a buyer actively looking for the kinds of used cars he wants -- the "muscle" models with more horsepower and flashy trim.
He says he took the risk or reopening the Blanken agency because, with a core of trusted, experienced employees at work at the Northeast dealership, he needed a new challenge.
And he's got one.