Cars Come Back

[HarleyEarl]

Friday, December 02, 2005
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Cars come back as sales sag

Pickups, SUVs slide 8.4 percent in November as more U.S. buyers choose passenger cars.

Bryce G. Hoffman and Josee Valcourt / The Detroit News

U.S. auto sales dropped 3 percent last month despite another wave of discounts by major automakers and lower gas prices as consumers took a break and continued to shift from SUVs to passenger cars and crossovers.

Detroit automakers have made a push to reclaim a larger slice of the U.S. passenger car market and the effort is paying off in robust sales of the Ford Fusion, Pontiac G6, Chevrolet Impala and other car models. But the rise in demand for some new car models has not been enough to offset the sharp decline in Big Three SUV sales, a source of hefty profits that has largely been diminished this year.

The auto industry's passenger car sales are outperforming pickups and sport utility vehicles in the U.S. market for the first time since 1981, according to Ford Motor Co.

"One year doesn't make a trend," said George Pipas, manager of sales analysis and reporting for Ford. "(But) for the first time in 20-some years, we see cars advancing."

Industry-wide, car sales increased 4.5 percent last month, while sales of pickups and SUVs declined 8.4 percent. Year to date, demand for passenger cars is up 2.8 percent while pickup and SUV demand has dropped by 0.6 percent. However, pickups and SUVs still account for 54.6 percent of the overall U.S. vehicle market, compared to just 45.4 percent for cars.

Overall, vehicle sales fell 2.8 percent from more than 1.99 million units in November 2004, to 1.6 million units last month.

For the year, the auto industry's overall sales are up 0.9 percent.

Ford saw the sharpest decline in sales among Detroit automakers, with its monthly sales dropping 14.7 percent from 217,859 vehicles to 185,852. As a result, Ford's U.S. market share dropped to just 15.9 percent for the month, compared to 18.2 percent last November.

General Motors Corp., hurt by sagging demand for its biggest sport utility vehicles, posted a 7.6 percent decline in sales, from 297,355 to 274,686. GM's market share fell to 23.6 percent from 24.8 percent last year.

DaimlerChrysler AG saw its sales fall for the first time in 19 months, dropping 2.7 percent from 164,280 in November 2004 to 159,898. The company's U.S. market share was flat at 13.7 percent.

All three automakers saw a slight improvement over October's dismal results, but the mid-month incentives they introduced did little to stem a decline in sales. Chrysler responded Thursday by offering new incentives up to $2,000 on all models.

Asian brands continued to advance, with Toyota Motor Corp. leading the charge. Its sales increased 10 percent from 154,272 to 169,665, giving Toyota 14.6 percent of the U.S. market. Honda Motor Co., helped by the redesigned Civic, saw its sales leap 10.8 percent, from 95,524 to 105,860.

The continuing decline in sales prompted Ford and GM to cut production by 20,000 vehicles during the rest of 2005. Ford said all of its cuts would affect truck output. GM said most of its production cuts would affect trucks.

GM will boost factory output slightly in the first quarter of 2006, but only because its production volume was so weak in the first quarter of 2005.

Ford said it will cut production by 3 percent in the first quarter of 2006 to about 885,000 vehicles from the roughly 908,000 it produced in the same period in 2005. However, Ford said production of passenger cars will increase sharply -- rising more than 21 percent from 264,000 cars in the first quarter of this year to 320,000 cars in the first three months of 2006.

"I'm hopeful that we're going to see more of a mix toward cars and (crossovers in 2006)," Pipas said.

Ford just launched a family of midsize passenger cars and expects to introduce several crossover models in 2006.

GM and Chrysler expect trucks and truck-based vehicles to continue to dominate their lineup in 2006. But the mix is changing.

"We still expect trucks to do a little better than cars," said Paul Ballew, executive director of global market and industry analysis for GM. "It's certainly something to keep an eye on."

Gary Dilts, Chrysler's senior vice president of sales, said new cars such as the Dodge Caliber will allow the company to capitalize on the shift away from SUVs.

"We're starting to put the pieces together for a pretty good car strategy," he said. "We are moving on to the car business, make no mistake."

Not everyone is convinced the surge in car sales is significant.

"It's a blip," said George Magliano, an analyst with Global Insight Inc. Magliano said the domestic vehicle market will continue to be dominated by trucks and crossovers.

Paul Taylor, chief economist for the National Automobile Dealers Association, said Ford and GM have had "fairly good luck" with the cars they introduced this year.

"We're very encouraged by the early response to the new midsize sedans," Pipas said, referring to the Mercury Milan, Lincoln Zephyr and Ford Fusion, three new passenger cars built off the already successful Mazda6 platform. "The cars are moving over the curb quickly."

"Fusion is driving more than half of the floor traffic to Ford dealerships," said Art Spinella, president of CNW Marketing Research. "First blush, based on exit interviews: Extremely positive responses to styling and price."

Spinella said that customers who test drove the Fusion gave it high marks -- much better than Ford received with the Five Hundred and only slightly lower than the Mustang.

"I just wish I could get more," said Berger Dettlinger, sales manager at Walnut Creek Ford in Walnut Creek, Calif.

"They get a little bit more every day," Ford spokesman Jim Cain said. "It's a nice problem to have. It means they're moving."

The new models are also selling without any help from the big incentives being offered on other Ford vehicles.

"From a dealer standpoint, that's a perfect scenario," said Jerry Reynolds, a Ford dealer in Garland, Texas.

"We haven't competed in that segment for years," Reynolds said, noting that many of his recent Fusion buyers are conquests from foreign automakers. "It's nice to see some imports on my trade-in lot."

Ford has shipped some 44,000 vehicles since September, and is looking at adding a third shift at its factory in Hermosillo, Mexico, which builds the Fusion and Mercury Milan, as early as the first quarter of next year.

Foreign automakers are also having success with new sedans.

Toyota saw sales of its flagship Avalon soar 262.5 percent from 2,269 units in November 2004 to 8,225 units last month.

Automakers are cautious about December and next year.

"We expect '06 to be pretty comparable to '05," said GM's Ballew. "We know that, in North America, we have a long way to go in terms of a recovery."

[Delta Force79]

This is interesting, while I was expecting truck and SUV sales to slip....I actually thought it would be more than this. All I see these days on lots are turcks and SUV's....Chevy and Ford dealerships seem to have plenty over overstock in them now...while cars are no doubt still sitting on lots too...I don't think I've seen so many turcks just sitting around in a long time

[ocnblu]

Contour/Mystique were reviewed well for their driving dynamics, from what I remember, but they didn't last, partly, because they were small inside. I honestly hope these new triplets do well for Ford, even if I find them boring in a few areas. I like what they're doing in marketing the Fusion... they're selling it young.

I see Chrysler is making an attempt to do the same with the Sebring TSi sedan package... sport suspension, no side moldings (the kids like that), aluminum rims, foglamps, low gloss woodgrain, a subtle rear spoiler... maybe this is a warmup for the next Sebring to have a more fun position in the market. Edited December 18, 2005 by ocnblu

[Croc]

GM just needs to go fun with its new midsizers.

[Drew Dowdell]

Curious if this would be an example of a bias... "Honda includes Acura" "Nissan includes Infinity" "Toyota includes Lexus" yet Jaguar, LR, Volvo, and Mazda aren't included with Ford Mercedes isn't included with Chrysler Kia and Hyundia aren't listed together it almost seems random who they do group together and who they dont....... except... not so random.