U.S. April Auto Sales May Rise Ahead of Japan Earthquake Effect

U.S. auto sales may have reached a 13 million annual pace for the third straight month, accelerating from a year earlier, as consumer confidence rose before vehicles produced prior to Japan’s earthquake began to run out.

April light-vehicle deliveries, to be released today, may have run at a seasonally adjusted 13 million annual rate, the average estimate of 12 analysts surveyed by Bloomberg. The pace was 13.1 million in March and 13.4 million in February, according to Autodata Corp. in Woodcliff Lake, New Jersey.

Confidence among U.S. consumers rose more than forecast in April, signaling that six straight months of job growth is helping Americans endure the highest gasoline prices in almost three years. Inventories for Japan-based manufacturers such as Toyota Motor Corp. (7203) and Honda Motor Co. may begin to dwindle next month, executives at the largest auto retailers said last week.

“We’re going to get a demand picture that should not be significantly affected by supply constraints, and that picture looks pretty good in spite of gas-price headwinds,” Itay Michaeli, an analyst at Citigroup Global Markets Inc. in New York, said in a telephone interview. The 13 million annual rate predicted by Citigroup is “a pretty good number with a backdrop to firmer industry pricing.”

Toyota, the world’s largest automaker, and its Japanese peers may begin to have shortages of new vehicles beginning this month and through the rest of the year, said Mike Jackson, chief executive officer of AutoNation Inc., the largest U.S. auto retailer. Weak supply may result in a 30 percent to 50 percent drop in deliveries of Japanese-brand vehicles this summer in the U.S., said Earl Hesterberg, CEO of Group 1 Automotive Inc.

Japan Quake

The March 11 earthquake in Japan and ongoing shortages of parts from the region may result in about 200,000 units of lost sales this year for Japanese brands that will mostly benefit General Motors Co. (GM) and Ford Motor Co. (F), Michaeli said.

GM may report a 14 percent gain in April deliveries, the average of seven analysts’ estimates. Detroit-based GM is managing through parts shortages and is unlikely to have production disruptions, CEO Dan Akerson said last month.

“We’ve managed to stay ahead of the wave,” Akerson said at a forum hosted by the National Automobile Dealers Association and IHS Automotive in New York. “I don’t think there’s anything we see on the horizon that would materially affect the year.”

Ford, which reported a $2.55 billion first-quarter profit last week, may have increased sales 14 percent in April, the average of seven estimates. There has been no lost production in North America and the quake will have no “material” impact on Dearborn, Michigan-based Ford’s earnings, Chief Financial Officer Lewis Booth said.

Hyundai, Kia

Hyundai Motor Co. (005380) and Kia Motors Corp., South Korea’s biggest carmakers, also have been “relatively unscathed by Japanese supply shortages,” said Chris Ceraso, an analyst at Credit Suisse Group AG in New York. The Seoul-based companies’ ability to take market share may be limited compared to GM and Ford because of their “tight” production capacity in North America, Ceraso wrote in an April 28 research note.

Hyundai and Kia are running full shifts with overtime at factories in Montgomery, Alabama, and West Point, Georgia, to build 10 percent more Sonata and Elantra sedans and additional Sorento sport-utility vehicles, spokesmen said last month.

While Chrysler Group LLC, operated by Fiat SpA (F), may have the smallest Japan supply risk of the major U.S. automakers, it is disadvantaged by a lineup heavy on pickups and SUVs, said Jesse Toprak, vice president of industry trends at TrueCar.com.

Chrysler, Fiat

“Chrysler’s exposure to what happened in Japan is quite limited,” Toprak, who’s based in Santa Monica, California, said in a telephone interview. “The fact that they had the least- direct relationship with Japan in terms of supply chain and had a decent amount of cars and parts in inventory enabled them to weather the storm with minimal damage thus far.”

Chrysler may say sales climbed 18 percent, the average of five analysts’ estimates. The Auburn Hills, Michigan-based automaker yesterday reported first-quarter net income of $116 million, the company’s first since emerging from bankruptcy reorganization in 2009, as U.S. sales of its Dodge and Jeep vehicles increased.

Deliveries of the Chrysler brand fell 9.2 percent during the first quarter, according to Autodata. The company has been slow to distribute new vehicles such as the Chrysler 200 and 300 sedans, largely because efforts to ensure quality caused delays, CEO Sergio Marchionne said yesterday.

‘Inadequate’ Car Inventory

“We’ve got less than two Chrysler 200s per dealer as of the end of the first quarter,” Marchionne said during a conference call with analysts and journalists. “That’s inadequate to try and get traction.”

Deliveries at Toyota may have risen 1.4 percent in April, the average of four analysts’ estimates. The Toyota City, Japan- based company said April 22 it may lose production of 300,000 autos in Japan and 100,000 at plants abroad through the end of April because of quake-related shutdowns. The automaker has said it’s unlikely to meet its goal of building 7.7 million cars and trucks this year.

Sales may have gained 14 percent at Honda, and Nissan Motor Co. deliveries may have increased 33 percent, the average of four analysts’ estimates.

Auto sales in Japan fell for the eighth straight month in April after the earthquake shut down production. Sales of cars, trucks and buses, excluding minicars, fell 51 percent from a year earlier to a record-low 108,824 vehicles in April, the Japan Automobile Dealers Association said in a statement yesterday.

Gas Prices Rise

Analysts’ expectations for higher U.S. market share in future months for GM and Ford have been offset by concerns about higher gas prices and a consumer shift to smaller, less- profitable cars from pricier SUVs and trucks. The average price of regular unleaded gasoline in the U.S. was $3.95 a gallon on May 1, according to AAA. The price peaked at $4.11 in July 2008.

“We don’t feel that gasoline prices will derail the recovery,” George Pipas, Ford’s sales analyst, told reporters yesterday at a briefing in Dearborn, where he predicted a 13 million U.S. auto sales rate for April. “And why? Because incomes are growing more than the increase in food and fuel prices.”

GM fell 13 percent this year to close yesterday at $32.18 in New York Stock Exchange composite trading. Ford dropped 8 percent in that span to $15.45.

Light-vehicle sales climbed to 11.6 million in 2010 from a 27-year low in 2009. Deliveries still were 31 percent fewer than the 16.8 million annual average from 2000 to 2007, according to Autodata. A 13 million rate this month would be a 16 percent increase from the 11.2 million pace in April 2010.

The following table shows estimates for car and light-truck sales in the U.S. Estimates for companies are a percentage change from April 2010, unadjusted for the difference in selling days. Forecasts for the seasonally adjusted annual rate, or SAAR, are in millions of vehicles.

April had 27 selling days, one more than a year earlier.


                              GM     Ford   Chrysler   SAAR

Himanshu Patel                NA      NA       NA      13.0
(JPMorgan)
Itay Michaeli                 NA      NA       NA      13.0
(Citigroup)
Rod Lache                     12%     11%      20%     13.0
(Deutsche Bank)
Christopher J. Ceraso         16%     21%      14%     13.1
(Credit Suisse)
Patrick Archambault           2.3%    16%      NA      13.0
(Goldman Sachs)
George Magliano               NA      NA       NA      12.8
(IHS Automotive)
Jeff Schuster                 NA      NA       NA      13.1
(J.D. Power)
Jessica Caldwell              20%     14%      22%     13.3
(Edmunds.com)
Jesse Toprak                  6.4%    12%      19%     13.1
(TrueCar.com)
Alan Baum                     NA      NA       NA      12.8
(Baum & Associates)
Peter Nesvold                 18%     12%      NA      12.9
(Jefferies)
Brian Johnson                 25%     14%      17%     13.2
(Barclays)

Average                       14%     14%      18%     13.0


     The following table shows estimates for company car and
light-truck sales as a percentage change from April 2010,
adjusted for the difference in selling days and excluding
discontinued brands from a year earlier for Ford, which sold the
Volvo brand and discontinued Mercury.

                              GM     Ford   Chrysler


Christopher J. Ceraso         12%     20%     10%
(Credit Suisse)
Patrick Archambault          -1.4%    15%     NA
(Goldman Sachs)
Peter Nesvold                 13%     11%     NA
(Jefferies)
Brian Johnson                 21%     12%     13%
(Barclays)


Average                       11%     15%     12%

To contact the reporter on this story: Craig Trudell in Southfield, Michigan, at ctrudell1@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net.

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