Detroit Three Zombie Slayers All Gained U.S. Market Share
For the first time in two decades, General Motors Co. (GM), Ford Motor Co. (F) and Chrysler Group LLC pulled off a sweep in the first three months of a year, with all three gaining U.S. market share in 2013’s first quarter.
The momentum likely built in April versus Toyota Motor Corp. (7203) and Honda Motor Co., according to a survey of analysts by Bloomberg News. The average estimates of analysts are that the U.S. carmakers will post bigger sales gains than Toyota and Honda for this month.
“The renaissance in Detroit is real,” Mike Jackson, chief executive officer of AutoNation Inc. (AN), the biggest U.S. auto dealership group, said this month in a telephone interview. “They have fantastic new products, and they’re in a very good position to compete.”
Shoddy cars that U.S. automakers offered for three decades cost the loyalty of the 75 million-member baby boom generation. That’s changing thanks to across-the-board improvement in quality that has closed the gap on once-dominant Toyota, said George Magliano, senior principal economist for IHS Automotive.
“From now on, the window has been opened to everybody,” Magliano, who is based in New York, said by telephone. “The baby boomers used to walk in like zombies and buy the Toyota. They don’t do that anymore. They can buy a Korean car, they can buy a Volkswagen, and they certainly can buy a Detroit car.”
U.S. light-vehicle sales probably climbed 11 percent in April to 1.31 million, the average estimate of nine analysts surveyed by Bloomberg. The annualized industry sales rate, adjusted for seasonal trends, may have risen to 15.2 million, the average of 17 estimates, from 14.1 million a year earlier. That would keep the market on pace for its best year since 2007.
Ford, GM and Chrysler gained 0.7, 0.5 and 0.2 percentage points of market share during the first quarter, the first time all three have gained share in that period of a year since 1993, the height of the sport-utility vehicle boom, according to Automotive News Data Center, which conducted the analysis at the request of Bloomberg News.
The three Detroit automakers now control 45.6 of the U.S. market through March, up from a first-quarter low of 43.8 percent in 2009, according to the data center. In the first three months of 1993, during then-President Bill Clinton’s first term, they shared 74.3 percent of the market, according to Automotive News.
U.S. automakers’ strides have been building in the past half decade after a painful downturn spurred restructurings that spared only Ford from bankruptcy. The three companies rid themselves of uncompetitive cost structures and plowed investments into cars that could hang with Japan’s giants.
Millions of recalls by Toyota in 2009 and 2010, Japan’s tsunami the next year and shaky rollouts of new product such as Honda’s Civic in 2011 opened the door for U.S. consumers to give Detroit another shot.
Ford, which made more money than it ever has in North America during the first quarter, probably led the three U.S. automakers with a 17 percent increase in U.S. sales this month, the average of 11 estimates. The Dearborn, Michigan-based company’s $2.4 billion pretax profit in its home region in the first three months of the year was powered by its industry-leading F-Series trucks and new Fusion sedan and Escape utility.
“All you have to do is look at the earnings numbers from Ford to see that they’re doing well,” said Alan Baum, principal of Baum & Associates, an auto consulting firm in West Bloomfield, Michigan. “F-Series drives its profits, but they also can’t make enough of the Fusion and the Escape.”
The redesigned Lincoln MKZ sedan, which Ford is counting on to revive its luxury line, will set a monthly sales record and drive an increase of at least 10 percent for the brand, Jim Farley, executive vice president of Ford global marketing and sales and Lincoln, said today on a conference call.
The gains being made by U.S. automakers are widespread. Ford’s Fusion, which ranked outside the ten best-selling models last year, has jumped to No. 6 this year through March. The 38 percent sales increase posted by Detroit-based GM’s Cadillac was the largest of any brand in the industry during that span, and Chrysler’s passenger car deliveries surged almost one third.
Chrysler, based in Auburn Hills, Michigan, probably extended its streak of year-over-year U.S. sales gains to 37 months by posting a 10 percent rise in April deliveries.
Chrysler said yesterday that first quarter net income dropped 65 percent while reaffiriming its full-year forecast. CEO Sergio Marchionne said on a Jan. 30 earnings call that shipments in the quarter would be hurt by introductions of the Jeep Compass and the Ram Heavy Duty pickup as well as preparation for the new Jeep Cherokee, which caused production of the predecessor Liberty to end last year.
GM sales also may have increased 10 percent, the averages of 11 estimates.
Holding onto their market share gains won’t be easy. Concerns are building about Japanese automakers answering Detroit’s rebound by using the weakening yen to their advantage, either by cutting prices or putting more content into their cars without charging more for it.
The yen has weakened about 18 percent versus the U.S. dollar since Oct. 31, when Prime Minister Shinzo Abe advocated for its decline to aid his country’s economy. Morgan Stanley has estimated the currency boost will give Japanese automakers an advantage of about $1,500 per car, while U.S. carmakers have put the figure at $5,700 per vehicle.
“We’re going to have to watch very closely what happens competitively as the Japanese competitors were able to benefit from the weak yen,” Bob Shanks, Ford’s chief financial officer, said last week during a conference call. “We are starting around the world, not just in North America, very selectively and very early, to see some signs. They’re taking advantage.”
So far this year, sizable U.S. sales increases have eluded most of the Japanese automakers even with the yen’s drop. Toyota, which is based in Toyota City, added 0.3 percentage points of U.S. market share through March, while Tokyo-based Honda’s share was little changed and Nissan lost 0.7 points, according to Autodata Corp.
Honda and Toyota sales may have risen 7.3 percent and 3.1 percent in April, respectively, the average estimate of eight analysts. Nissan probably will post the industry’s biggest increase, with a 26 percent surge, the average of eight estimates.
Toyota’s plan is for its Camry sedan to remain the top-selling U.S. car for a 12th consecutive year, amid tougher competition from Ford’s Fusion and Honda’s Accord, U.S. Group Vice President Bill Fay said in an April 26 telephone interview. Camry deliveries slipped 4.3 percent in the first quarter.
“People see the new Fusion and like it and the Accord is doing well,” Fay said. “Our goal, in spite of better competition, is for Camry to stay No. 1.”
There are signs that Seoul-based Hyundai Motor Co. (005380) and Kia Motors Corp. (000270) are losing some of the gains they made in the U.S. during the past two decades because of production constraints and the Korean won strengthening relative to the Japanese yen. The two affiliates, which report sales separately, lost 0.2 and 0.6 percentage points of market share through the first three months, according to Autodata.
Hyundai and Kia’s struggles may have endured in April. Combined sales for the two companies probably slipped 2.4 percent, the average of seven estimates. The two companies are constrained by a lack of local production capacity and the yen’s 16 percent drop against the South Korean won since the end of October.
“We may see the Japanese automakers get more aggressive in terms of marketing and in terms of packaging more content into their vehicles and not raising prices,” Michelle Krebs, an analyst for auto researcher Edmunds.com, said by telephone. “That’s the Koreans’ game. That’s how they gained a foothold -- the value proposition. That’s not in their favor now.”
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