Accord Fuels Honda Sales Surge
Honda Motor (HMC) and its Acura division enjoyed record sales in September in a generally declining market, as Japanese brands continue to take U.S. market share from the Big Three domestic manufacturers. Honda's performance comes despite less than a full month's worth of sales for an all-new Accord (BusinessWeek.com, 8/28/07), which debuted in mid-September. Counting Honda and Acura together, sales were up about 14%.
General Motors (GM) was a notable market-share exception. At least for the month of September, GM reversed a long slide, gaining a fraction of a percentage point, to 25.5% of the U.S. market. "This really was the result of new products like the Buick Enclave, the GMC Acadia, and the Cadillac CTS," says Jesse Toprak, an analyst for Edmunds.com. "If the domestics can make desirable cars that are priced and designed right and attractive to customers, there's no reason they can't sell a lot of them," he says.
GM's U.S. sales were up slightly for the second straight month in an otherwise declining market.
According to Autodata, U.S. light-vehicle sales totaled about 1.3 million in September. That's 2.9% lower than in September, 2006. Adjusting for the fact that there were 25 selling days in the month just ended, vs. 26 in the year-ago month, the average daily selling rate in September was up about 1%. (Monthly percentage comparisons in this story are adjusted for the daily selling rate.)
Year-to-date, U.S. light-vehicle sales—that is, cars and light trucks, not counting medium and heavy trucks—stood at about 12.3 million through September, down 2.8% from the year-ago period.
Larger Vehicles Sell Well for GM
"We have bucked the industry trend for the second consecutive month," says Paul Ballew, executive director, global market and industry analysis for GM.
Despite a long-term trend toward more fuel-efficient vehicles, GM had sales gains in its fairly recently redesigned full-size sport-utility vehicles and pickups like the Chevrolet Suburban and the Chevy Silverado, plus its newer and somewhat more fuel-efficient crossover vehicles, such as the GMC Acadia.
GM sold 337,640 cars and light trucks in September. That was about 4% ahead of the year-ago month, on a daily-selling-rate basis. In absolute terms, sales were down 0.2%. Year-to-date, GM sales of 2,969,505 were off 6.7% through the end of September vs. the year-ago period.
Ford Sales Fall
GM and the rest of the domestic auto industry still face plenty of challenges. Ford Motor (F) sales plunged 21% from the year-ago month, to 189,863 cars and light trucks. Not counting a self-imposed cut in unprofitable sales to daily rental fleets, Ford's retail sales still fell around 12%.
"To use a golf metaphor, the industry 'parred' a difficult hole in September, even though it was below trend," says George Pipas, U.S. sales analysis manager for Ford. By "below trend," he means industry sales in September were lower than analyst forecasts based on historical demand.
Sales of Ford's biggest seller, the workhorse F-Series pickup, fell about 20%, to 56,065, in September. The reintroduced Taurus sedan, a former industry volume leader and a replacement for the underperforming Ford Five Hundred, is also off to a very slow start. "I don't think we were quite up to par," Pipas says of Ford's performance.
Cutting Costs to Match Revenues
Chrysler, formerly half of DaimlerChrysler, reported its sales were down about 2%, to 159,799, for the month. Chrysler said Dodge sales were up about 9%, while sales for the Chrysler and Jeep brands were off. Year-to-date through September, Chrysler sales were down about 3%, to 1,578,823.
Like Ford, Chrysler said its sales to daily rental fleets were down. Unlike Ford, Chrysler said its retail sales were up, although the now privately held company would not say by how much.
The Detroit Three have all cut back on production (and jobs) in an effort to bring costs in line with revenues and, ultimately, to cut back on incentives. According to Edmunds.com, Chrysler had the highest average incentive of the trio in September, at $3,769, but Ford and GM were both above $3,000. The trouble for them is that Toyota Motor (TM) averaged less than $900 for incentives.
Applauding the Fed Rate Cut
GM's Ballew says the Federal Reserve's 50-basis-point cut in interest rates last month restored what he considered a "normal operating environment" in equity markets. "We didn't want the volatility in the markets to create a credit crunch in auto lending. The last real severe one was in the early 1980s, and we'd rather not replay that if we can avoid it," he says.
Ballew thinks the Fed will cut another 75 to 100 basis points in the coming months. Separately, Ellen Hughes-Cromwick, Ford's chief economist, also predicts the Fed will make further interest rate cuts.
Ballew says the U.S. economy is in what he calls a "growth recession," but not a full-blown recession. Harder hit are households that make less than $75,000 a year, which according to Ballew, historically account for about half of new-vehicle sales. "There are households that are feeling some pinch.… New vehicle purchases are a deferrable purchase," Ballew says. "We don't advise you defer it, but it's deferrable."