Auto sales get ‘clunker’ lift

Tuesday, August 4, 2009

Auto sales get ‘clunker’ lift

Bryce G. Hoffman and Robert Snell / The Detroit News

Washington’s "cash for clunkers" program breathed some much-needed life into the U.S. automobile market in July, boosting sales 16 percent month over month.

But with the program’s $1 billion budget exhausted after just one week and the Senate still debating whether to pump in more cash, it remains unclear how long these gains can be sustained.

Even with the government incentives, overall industry sales totaled 997,824 cars and trucks last month, a 12.2 percent decline from the same period a year ago. Still, that translated into a seasonally adjusted annualized selling rate of 11.24 million vehicles — a dramatic increase over last month’s selling rate of 9.69 million units.

"The news, generally, is pretty good," said CEO Jeremy Anwyl. "There’s more going on than just ‘cash for clunkers’ in the marketplace."

The news was particularly good for Ford Motor Co., which posted the first monthly sales increase of any full-line manufacturer this year. Its sales rose from 160,990 vehicles in July 2008 to 164,795 last month — an increase of 2.4 percent. Ford’s share of the market also jumped from 14.2 percent to 16.5 percent. It was the ninth time Ford has gained market share in the past 10 months.

"’Cash for clunkers’ pushed us over the top," said George Pipas, head of sales analysis and forecasting at Ford, though he said sales were already strengthening before it went into effect July 24.

Edmunds analyst Jessica Caldwell agreed.

"There was already momentum building there, and ‘cash for clunkers’ just accelerated that," she said, adding that Ford "came out of the gate strong" with a special Web site designed to help consumers determine whether their vehicle qualified for the federal program, which offered consumers up to $4,500 to trade-in their used car or truck for a new, more fuel-efficient model. "They kind of took the market a little bit by storm."

According to preliminary data, the Ford Focus compact was the most popular choice for consumers who took advantage of the program, while the Ford Explorer sport utility vehicle was the most common trade-in.

Shares in Ford climbed more than 4 percent to close at $8.33, a new 52-week high.

But Pipas said it was too soon to tell whether Ford’s gains could be sustained.

"Clearly, what happens inside the Beltway this week will be a factor," he said, referring to the debate about additional funding for the program.

Even without its benefit, overall industry sales would probably have increased slightly from June to July, said Ford economist Emily Kolinski Morris. With it factored out, she said the selling rate would have been about 10 million units — still up from June.

"We’ve also seen some good news on the economic front in the past couple of weeks," she said, calling recent economic data "encouraging."

GM sales figures strong

Even with "cash for clunkers," General Motors Co. saw its sales fall 19.4 percent from 233,340 units a year ago to 188,156 units. Its share of the market also declined from 20.5 to 18.9 percent.

But it was still the strongest sales figure in 10 months for the automaker, which emerged from bankruptcy July 10.

"Most of the negative news is behind us now," said Mike DiGiovanni, GM’s executive director of global market and industry analysis. "We really are seeing car buyers starting to return to showrooms. ‘Cash for clunkers’ came at a very, very good time to jump-start the economy, which was already in the early stages of recovery."

On Monday, GM announced it will resume leasing vehicles to customers in five states: Michigan, New York, New Jersey, Connecticut and Ohio. GM abandoned the practice last year as resale values fell.

The program runs through Aug. 31. Eligible vehicles include the 2009 Cadillac CTS and Chevrolet Malibu and Traverse. Consumers also can lease 2010 models of the Chevrolet Equinox, Buick LaCrosse and Enclave, and GMC Acadia, and buyers nationwide can lease the 2010 Cadillac SRX crossover.

Chrysler Group LLC sales were down 9.4 percent year over year, dropping from 98,109 units to 88,900. But Chrysler’s market share increased from 8.6 percent to 8.9 percent.

"The government’s program is doing what it is designed to do — spur consumers to trade in older gas guzzlers for new, fuel-efficient vehicles," said Peter Fong, head of sales for the Auburn Hills automaker, in a statement. "While we don’t expect the industry sales forecast to change dramatically, we are seeing encouraging signs that consumer confidence is building, and more consumers are considering purchasing a new vehicle."

Sales down for Japanese

All three of the major Japanese automakers saw their sales fall in July, albeit from exceptionally strong numbers a year ago when high gasoline prices boosted demand for their fuel-efficient cars and crossover.

Toyota Motor Corp.’s were down 11.4 percent, dropping from 197,424 vehicles to 174,872, while its market share increased to 17.5 percent from 17.4 percent, once again passing Ford to reclaim the No. 2 spot. It said those numbers would have been worse without "cash for clunkers," which it said accounted for at least 30,000 additional sales last month.

"This confirms that there’s an appetite out there for fuel-efficient vehicles," said Bob Carter, general manager of the Toyota division at Toyota Motor Sales, who said the program proved a big help in California — a key market for Toyota, and one that has been hit hard by the recession. "(It) blew the lid off our California sales, which got a 55 percent lift over June."

Honda Motor Co. sales dropped 17.3 percent, from 138,744 vehicles to 114,690, while its market share declined from 12.2 percent to 11.5 percent.

Nissan sales fell from 95,319 units to 71,847 units — a 24.6 percent decline. Its share of the market also fell from 8.4 percent to 7.2 percent.

The biggest winner was Subaru, which posted a 34.2 percent sales gain, on sales of 21,839 vehicles.

South Korea’s Hyundai Motor Co. posted its seventh consecutive month of sales increases, which Edmunds’ Anwyl said underscores just how value-conscious consumers have become in the face of the worst economic crisis since the Great Depression. He warned this could spell trouble as automakers ratchet up prices in response to stronger demand.

Incentive spending fell in July, and while Anwyl said he is confident that there will be more good news in August and September, he said sales could fall off after that.

Ford’s Pipas said there is no doubt that cash for clunkers pulled ahead sales that would have occurred later, raising the specter of reduced demand in the future. But he said the program is achieving its goal of kick-starting auto sales and benefiting the broader economy.

"We may have seen the bottom, but we’re not out of the woods yet," he said. "I would challenge anybody to show me a one-week program — a billion dollars — that had as much benefit to the consumer and as much benefit to the environment as this."



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