Honda Sees Surprise U.S. Sales Gain Meeting Pent-Up Demand: Cars
Honda Motor Co. (7267) said its U.S. sales are growing in October, defying analysts’ projections. That may drive industrywide deliveries to exceed the average outlook, already anticipated as the best in eight months.
Honda sees an October sales gain for the first time since April, said John Mendel, who leads the company’s U.S. sales efforts. His outlook contrasts with five analysts’ average estimate for a 2.5 percent drop. The company, which Mendel estimates has lost 200,000 deliveries since Japan’s tsunami in March, told dealers today it may lose production in the U.S. and Canada because of floods in Thailand.
Higher output from Honda and Toyota Motor Corp. (7203) combined with growing demand for full-size trucks by Ford Motor Co. (F) and General Motors Co. (GM) probably accelerated the seasonally adjusted annual rate to 13.2 million vehicle sales, the average estimate of 14 analysts surveyed by Bloomberg. That would be the fastest pace since February. The rate dipped below 12 million in May and June.
“Everything we have inventory of is doing well,” Mendel said, singling out the lack of Fit subcompacts. Dealers took orders for more than 50,000 Hondas and almost 6,000 Acuras from mid-June through August, locking in buyers with lease deals and low-interest loans. Those customers provide a fourth-quarter “tailwind,” he said. “The dealers are feeling pretty good.”
While Honda beating expectations may indicate the industry is recovering faster than the analysts’ consensus, Mendel said he doubts that October’s pace exceeded February’s 13.3 million.
“I don’t know that it will be the best month of the year,” he said in an interview last week in Carlsbad, California. “I wouldn’t say it’s a robust market. We’re benefiting quite frankly from pent-up demand.”
Outside the U.S., Honda and other carmakers are facing their biggest disruption since the March 11 earthquake and tsunami that crippled factories across Japan. Floods in Thailand have inundated 10,000 factories since July.
Honda abandoned its full-year profit forecasts today, citing Thailand’s worst floods in half a century. North American production will be about 50 percent less than planned from Nov. 2 through Nov. 10 as the floods disrupt shipments of parts, according to a statement. Output in North America may be affected through late December, Mendel said today in an e-mail to dealers.
Honda fell 3.7 percent to close at 2,406 yen in Tokyo trading. The stock has slid 25 percent this year, the worst performer among Japan’s three-biggest carmakers. Honda’s American depositary receipts dropped 8.1 percent to $29.90 at the close in New York.
‘Signs of Life’
“Modest signs of life” in the construction industry, combined with the need for replacement vehicles and rising discounts will drive growing truck sales, said Peter Nesvold, an analyst at Jefferies Group Inc. The average age of U.S. vehicles has surged to 10.7 years, from 8.9 years at the start of the decade, according to R.L. Polk & Co.
GM may report a 6.7 percent increase in October sales, the average of eight analysts’ estimates. The Detroit-based automaker increased average incentive spending in September by 15 percent to $3,749 per light truck, according to Autodata Corp. GM’s truck discounts through September fell 4.6 percent, according to the Woodcliff Lake, New Jersey-based researcher.
Sales for Ford may rise 6.6 percent, the average of eight estimates. Higher prices and fewer incentives boosted the Dearborn, Michigan-based automaker’s pretax profit by $900 million in the quarter ending Sept. 30, when it earned a net income of $1.65 billion.
GM is offering discounts of $5,505 and interest-free financing to some buyers of 2011 model-year Silverado pickups, according to AIS Rebates, an Ann Arbor, Michigan-based provider of incentive data to dealers. Ford is offering $5,000 for some buyers of 2011 F-150 trucks.
GM fell 2.3 percent to $25.85 in New York trading. Ford declined 2.7 percent to $11.68.
Housing (NHSPSTOT) starts climbed 15 percent last month to the best annual rate since April 2010, according to the Commerce Department. U.S. construction spending unexpectedly rebounded in August by 1.4 percent, department figures showed on Oct. 3.
“I’m not a housing bull, I’m not a construction bull, but at the margin there are a couple of data points that look a little bit better,” Jefferies’ Nesvold, who is based in New York, said in an Oct. 27 conference call with reporters.
Chrysler Group LLC, the automaker controlled by Fiat SpA (F), may say deliveries surged 28 percent in October, the average of seven analysts’ estimates. The Auburn Hills, Michigan-based automaker’s three rated brands improved in Consumer Reports’ annual auto-reliability survey.
Chrysler’s newest models such as the Jeep Grand Cherokee and Dodge Durango sport-utility vehicles were ranked average or above average for reliability, David Champion, senior director of Yonkers, New York-based Consumer Reports’ Automotive Test Center, said in an Oct. 25 interview.
“It’s going to be a better month because the availability is there,” Alan Baum, an industry consultant at Baum & Associates in West Bloomfield, Michigan, said in a phone interview.
Toyota, ramping up production of models such as the redesigned Camry sedan, may say sales fell 9.1 percent, the average of five analysts’ estimates in a Bloomberg survey.
The Toyota City, Japan-based automaker canceled overtime shifts Oct. 29 at plants in Indiana, Kentucky and Canada as the Thai floods disrupted auto-parts supply. Toyota (7201) had said it expected to reverse monthly U.S. sales declines beginning this month.
Sales declines at Toyota and Honda contributed to the U.S. auto sales pace slowing from a 13.1 million rate averaged in the year’s first four months to as low as 11.6 million in June, according to Autodata.
Tokyo-based Honda has 33 days of total inventory, below the industry norm of about 60 days, according to Westlake Village, California-based J.D. Power. To recover sales from earlier in the year, dealers will sell deeper into inventory, Mendel said, ending 2011 with half as many vehicles on hand as a year earlier.
Nissan Motor Co., the Yokohama-based automaker that has kept inventories higher than its Japanese rivals, may say deliveries climbed 16 percent in October, the average of five estimates.
Hyundai Motor Co. (005380), South Korea’s largest automaker, and its affiliate Kia Motors Corp. (000270), may combine to sell 15 percent more vehicles than a year earlier, according to the average of three estimates. Both automakers are based in Seoul.
Industrywide deliveries may rise about 9.5 percent to 12.7 million cars and light trucks this year, the average of 18 analysts’ estimates in a Bloomberg survey in August. The U.S. averaged annual sales of 16.8 million vehicles from 2000 to 2007, according to Woodcliff Lake, New Jersey-based Autodata.
Many customers who put off buying a new vehicle earlier this year will do so next year, Group 1 Automotive Inc. (GPI) Chief Executive Officer Earl Hesterberg, said in an interview. He said sales will be 13.5 million next year “at a minimum.”
“I’ve witnessed the strength in the market through some of these stock-market gyrations and debt gyrations and we’re still running at 13 million,” said Hesterberg, who is based in Houston. “There’s going to be growth in the market again.”
The following table shows estimates for car and light-truck sales in the U.S. Estimates for companies are a percentage change from October 2010. Forecasts for the seasonally adjusted annual rate, or SAAR, are in millions of light vehicles.
October had 26 selling days, one fewer than the year-earlier period.
GM Ford Chrysler SAAR Himanshu Patel NA NA NA 13.2 (JPMorgan) Rod Lache 5.5% 4.1% 24% 13.0 (Deutsche Bank) Chris Ceraso 7.2% 7.5% 20% 13.2 (Credit Suisse) Brian Johnson 4.3% 8.8% 19% 13.3 (Barclays) Peter Nesvold 7.1% 1.8% NA 13.3 (Jefferies) Patrick Archambault 8.7% 6.5% 35% 13.2 (Goldman Sachs) Itay Michaeli NA NA NA 13.1 (Citigroup) Adam Jonas NA NA NA 13.3 (Morgan Stanley) George Magliano NA NA NA 12.9 (IHS Automotive) Jeff Schuster NA NA NA 13.1 (J.D. Power) Jessica Caldwell 6.9% 8% 27% 13.4 (Edmunds.com) Jesse Toprak 4.7% 7.4% 33% 13.4 (TrueCar.com) Alan Baum NA NA NA 13.4 (Baum & Associates) Seth Weber 9.2% 8.6% 36% 13.4 (RBC) Average 6.7% 6.6% 28% 13.2 The following table shows selling-day adjusted estimates for company car and light-truck sales as a percentage change from October 2010. GM Ford Chrysler Rod Lache 9.6% 10% 30% (Deutsche Bank) Chris Ceraso 11% 12% 25% (Credit Suisse) Brian Johnson 8.3% 13% 24% (Barclays) Peter Nesvold 11% 5.8% NA (Jefferies) Patrick Archambault 13% 11% 40% (Goldman Sachs) Seth Weber 13% 13% 41% (RBC) Average 11% 11% 32%
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