Bloomberg News

Sandy Spurs Toyota, Honda, Chrysler to Scrap Vehicles

November 07, 2012

Sandy Leaves Toyota-to-Chrysler-to-Fisker Scrapping 15,000 Cars

Cars damaged in Manhattan from Hurricane Sandy. Photographer: Victor J. Blue/Bloomberg

Toyota Motor Corp. (7203), Chrysler Group LLC, Nissan Motor Co. (7201), Honda Motor Co. (7267) and their dealers plan to scrap more than 15,000 new vehicles damaged by Hurricane Sandy as the industry continues assessing the storm’s impact.

Nissan alone estimates more than 6,000 Nissan and luxury Infiniti brand cars and light trucks are “un-saleable” because of the storm, Travis Parman, a company spokesman, said late this week. Including used autos and those of individual owners, as many as 200,000 may have to be replaced, said Larry Dixon, senior analyst for the National Automobile Dealers Association.

“Total vehicles affected may be about one-third of what we saw with Hurricane Katrina, and that was about 600,000” used and new vehicles, Dixon, based in McLean, Virginia, said in a phone interview. “We don’t see replacement demand starting to accelerate until we’re into December.”

Sandy, the biggest Atlantic storm in U.S. history, raked New Jersey, New York and the surrounding region with winds of as much as 100 miles (161 kilometers) an hour and led to at least 100 deaths. The storm’s surge of more than 13 feet (4 meters) inundated transit tunnels and underground utilities, destroyed homes and eroded natural barriers such as beaches after it struck Oct. 29.

Missed Estimates

U.S. industrywide light-vehicle sales in October fell short of the average estimate of analysts surveyed by Bloomberg after Sandy slammed the East Coast during the industry’s busiest time of the month. Sales for the month rose 6.9 percent, below the 12 percent gain that was the average of nine estimates.

Carmakers have said those sales should be made up by year- end.

Fisker Automotive Inc., a startup maker of luxury plug-in hybrids, lost 338 of its $103,000 Karma sedans at the port of Newark, New Jersey, including 16 that burned in a fire triggered by salt water, said Roger Ormisher, a spokesman for the Anaheim, California-based company.

“We don’t have a full estimate of the cost to replace them yet,” he said. The closely held company’s cars were being processed for delivery to dealers when the storm arrived. Replacing 338 Karmas at the $103,000 base price would total $34.8 million.

Dozens of auto dealerships still have limited or no power more than a week after Sandy knocked out electricity to 8.5 million homes and businesses across 21 states.

Nissan Scrapping

“Between dealer and port vehicles for both Nissan and Infiniti, initial estimates have us at more than 6,000 units as ‘un-saleable’ to be scrapped,” Parman said in an e-mail message this week.

While 56 Nissan dealers were shut down by Sandy a week ago, “all but five are operational again,” he said. All New York region Infiniti stores have also reopened, except for one, Parman said.

“We’re working closely with dealers to get them replacement product as soon as they’re ready to receive,” he said.

Some 4,000 Toyota and Lexus vehicles were at the company’s port facility in Newark when the storm hit, Jana Hartline, a spokeswoman for Toyota’s U.S. unit in Torrance, California, said in a phone interview.

“We have about 1,300 that we are taking a second look at” that may be salvaged, she said. “A little bit under 3,000 will likely be scrapped.”

Toyota Dealers

Another 825 vehicles in dealer inventory were damaged by Sandy and can’t be sold, Hartline said.

Four Toyota dealers still lacked power as of Nov. 6, “but all of them are now able to receive vehicles,” she said. Toyota is based in Toyota City, Japan.

Honda and Acura dealers expect to have to scrap about 3,440 vehicles, said Chris Martin, a spokesman for Honda’s U.S. unit in Torrance, California. Scrappage decisions will be determined by dealers and their insurers, he said.

Additionally, about 500 U.S.-built vehicles Honda was preparing to export from the FAPS Inc. port facility in Newark were also damaged, Martin said yesterday.

Both Toyota and Tokyo-based Honda said they didn’t yet have estimates of the value of the vehicles lost. Toyota’s American depositary receipts fell 1.9 percent to $79.68 at the close in New York. Honda’s slipped 1.6 percent to $30.41.

Chrysler dealers lost about 750 vehicles from their stock due to hurricane damage, said Ralph Kisiel, a spokesman for the Auburn Hills, Michigan-based carmaker that’s majority-owned by Fiat SpA. (F)

GM, Ford

General Motors Co. (GM:US), the largest U.S. automaker, isn’t yet able to provide an estimate for damaged vehicles, said Jim Cain, a spokesman for the Detroit-based company.

Ford Motor Co. (F:US) also couldn’t immediately provide estimates for storm damage, said Elizabeth Weigandt, a spokeswoman for the Dearborn, Michigan-based automaker.

GM declined 4.4 percent to $25.03 yesterday at the close. Ford dropped 3.2 percent to $11.06.

About 886,000 homes and businesses remained in the dark in New York and New Jersey this week, according to the U.S. Energy Department.

Hyundai Motor Co. (005380)’s U.S. unit lost 400 vehicles, said Lori Scholz, a company spokeswoman in Costa Mesa, California.

Only two of the Seoul-based carmaker’s dealers in the New York region were still closed as Nov. 6, she said.

Kia Motors Corp. (000270), a Hyundai affiliate also based in Seoul, has about 200 vehicles “damaged beyond repair,” said Scott McKee, a spokesman for the company’s U.S. unit in Irvine, California.

Kia Inventory

The company’s dealers in Bay Ridge, New Jersey, Jersey City and Staten Island “lost most or all of their inventory,” McKee said in an e-mail message this week. The carmaker is working with those stores on a recovery plan, he said.

New York and New Jersey are among the top 15 U.S. states for vehicles in operation and auto dealerships, NADA said in a report this week. The two states also have a larger portions of cars than trucks and non-U.S.-based brands account for a significant share of total sales, the dealer organization said.

There are 886 auto dealerships in New York and 463 in New Jersey, according to NADA.

To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; 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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