Bloomberg News

Frigid End Can’t Stop Best U.S. Auto Sales Year Since ’07

January 03, 2014

Ford, Chrysler Gains Trail Estimates as Cold Snap Slows Shoppers

Ford Motor Co. Fusion and F-150 vehicles in Southfield, Michigan, on Dec. 20, 2013. Photographer: Jeff Kowalsky/Bloomberg

A sluggish December failed to derail the U.S. auto industry’s best year since 2007, as sales of Ford (F:US) Motor Co.’s Fusion surged to a record, Chrysler Group LLC posted its 45th straight month of sales increases and General Motors Co. (GM:US)’s Cadillac cars soared 48 percent.

While cold and nasty weather on the East Coast and Midwest last month slowed GM’s sales gains for the year and left its top U.S. market share little changed for 2013, Ford boosted the second-largest share to 15.9 percent from 15.5 percent and Chrysler increased its No. 4 market share to 11.5 percent from 11.4 percent. The three Detroit-area automakers came within about one-20th of a percentage point of posting market share gains in the same year for the first time since 1988, according to data compiled by Bloomberg.

With U.S. automakers now boasting successful brands as diverse as Chrysler Group (CGC:US)’s value line and GM’s Cadillac luxury marque, Detroit’s car companies ended 2013 in a position that would have seemed unfathomable just five years ago, when GM and Chrysler headed toward government-backed bankruptcies and Ford, using money borrowed from mortgaging its Blue Oval, struggled to restructure itself amid the longest recession since the Great Depression.

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Getting their financial houses in order and fielding attractive cars such as Ford’s Fusion has freed the Detroit Three from the longtime bind of choosing between volume or charging enough for their cars to earn profits on them, Bloomberg Industries’ Kevin Tynan said.

Each of the automakers boosted the average selling prices of their vehicles in 2013 amid a U.S. auto market now poised for a fifth consecutive year of expansion in 2014.

GM Models

Kurt McNeil, GM’s vice president of U.S. sales operation, for example, said his company’s average transaction prices “are now the highest in GM’s history,” after introducing 18 new or refreshed vehicles last year. GM is putting more emphasis on retail sales rather than discounted models for bulk buyers.

“All of this new product is going to flow into a market that has plenty of room to grow,” he said. “Things continue to fall into place from an economic standpoint, especially in the last month or two.”

Automakers’ sales have been of “much better quality” than before the recession that ended in 2009, John Casesa, senior managing director at Guggenheim Partners LLC, said yesterday in a Bloomberg Radio interview.

The industry used to exceed 16 million sales per year “only by way of very heavy incentives to get people to buy cars,” Casesa said. “Today, incentives are much lower, the industry has cut capacity and we’re selling 16 million units at very profitable prices. So we’ve got a much healthier industry.”

New Era

The improvements come as GM begins its first year free of U.S. government ownership, Chrysler merges with Fiat SpA (F) and Ford likely enters a new generation of leadership.

“New-car sales in 2013 represent a 50 percent increase from the depths of the recession just a few years ago,” Karl Brauer, a senior analyst for Kelley Blue Book, said in an e-mail statement. “Several factors are behind this growth including unprecedented pent-up demand, relatively easy access to credit and a growing, stable economy. If these factors remain in place for 2014, car sales should continue to rise.”

U.S. auto sales industrywide increased 7.6 percent in 2013 to 15.6 million. Sales in December fell short of analysts’ estimates as cold weather may have kept buyers from dealers’ lots. Industrywide sales in December rose 0.3 percent to 1.36 million, compared with the average of nine estimates in a survey by Bloomberg News for a 3.8 percent rise.

December Miss

The sales pace for the month, adjusted for seasonal trends, was 15.4 million, missing the 15.8 million average of analysts’ estimates. The December pace compared with 15.2 million a year earlier and 16.4 million in November, the fastest since February 2007, according to researcher Autodata Corp.

“The sales pace at the beginning of the month was slower than expected as a lot of places were hit by bad weather,” Michelle Krebs, an auto analyst with researcher Edmunds.com, said yesterday in an interview. “Dealers thought sales would come in bigger than usual in that last week of the month and it turned out the weather wasn’t so great then, either.”

All of the biggest automakers in the U.S. missed analysts’ estimates, including GM, which fell 6.3 percent in December, trailing analysts average projection for an increase of 1.5 percent, which would likely have given the automaker a slight market share gain for the year. GM also said it will stop holding regular monthly conference calls to review U.S. sales.

Chevrolet Cars

GM’s December sales were bolstered by the Chevrolet Malibu, which rose 33 percent to 15,493 deliveries, and Impala, which increased 10 percent to 10,633. Sales of the Chevrolet Silverado pickup dropped 16 percent to 42,593. For the year, GM sales rose 7.3 percent to 2.8 million.

Ford’s F-Series pickup line was the top-selling vehicle for the 32nd consecutive year, with deliveries climbing 18 percent to 763,402. Silverado sales for the year rose 15 percent to 480,414 and Chrysler’s Ram trucks gained 21 percent to 355,673.

The Detroit Three complemented their strengths in pickups with advances in passenger cars. Ford’s Fusion sales increased 22 percent for the year to 295,280 and joined GM’s Chevy Cruze and Sonic in setting annual records. Deliveries for Chrysler’s Dodge line of cars increased 27 percent, according to Autodata.

Ford’s Month

Ford car sales fell 9.3 percent last month, as only the Fusion, which set a December record, and Mustang increased deliveries. Utilities and trucks led the gains, as the Escape increased 22 percent, to 24,462 deliveries, and F-Series pickups rose 8.4 percent to 74,592. The company said it had its best U.S. sales year since 2006 at a total of 2.49 million vehicles.

Chrysler, helped by the new Jeep Cherokee, increased to 161,007 cars and light truck sales in December, the Auburn Hills, Michigan-based company said in its statement. Fiat said on Jan. 1 it had reached a $4.35 billion deal with a union trust to buy all Chrysler stock that the Turin, Italy-based company doesn’t already own.

Cherokee sales climbed 48 percent from November to 15,038 in its third month in the market, helping Chrysler extend its streak of year-over-year sales gains. Deliveries of Ram pickups gained 11 percent from a year earlier to 33,405, and sales of Town & Country minivans rose 5 percent to 9,737. The Ram pickup gain made for its best December sales since 2004.

Jeep Strength

“All I can say is Jeep, Jeep, Jeep,” Edmunds.com’s Krebs said yesterday. “Car shoppers have forgiven or forgotten that the Cherokee had a stalled launch and they’re buying it in big numbers.”

For the year, Chrysler Group sales rose 9 percent to 1.8 million, as car sales increased 11 percent while truck deliveries expanded 8.3 percent. Jeep sales rose 34 percent for December to 53,275, the brand’s second-best month ever, trailing only July 2005. Deliveries for 2013 will set a global mark for the brand, the company said yesterday, adding that final numbers won’t be tallied until next week.

The second-largest national market behind China is an important one for Detroit automakers. U.S. deliveries made up 29 percent of GM’s global sales during the first three quarters of 2013. The final quarter’s global results will be released later this month, GM said. Ford’s U.S deliveries comprised 40 percent of its global sales while Chrysler is predominately a North American automaker.

Ford Brand

Leading the way for Detroit on a brand basis last year was Ford, which extended its sales lead over the Toyota line on the strength of Fusion and its F-Series pickups. Its lead over the namesake division for Toyota City, Japan-based Toyota Motor Corp. was 441,347, according to Woodcliff Lake, New Jersey-based Autodata. The Toyota line trailed Ford by 322,521 in 2012.

The gains by Detroit are striking No. 3 Toyota and Tokyo-based Honda Motor Co. (7267), No. 5, in the hearts of their U.S. lineups. The Fusion’s 22 percent sales increase for the year outpaced gains of 0.9 percent for Camry and 10 percent for Accord. Fusions sold for an average of $26,378 through last year’s first 11 months, according to Kelley Blue Book, a premium of $897 to Accord and $2,224 to Camry, the top-selling car in the U.S. for a 12th consecutive year.

U.S. market-share among the top automakers were unchanged in 2013, as were the rankings globally through three quarters, with Toyota leading GM and Volkswagen AG.

Toyota, Honda and European carmakers including VW will test Detroit’s growth this year. Automakers plan to add 2.1 million vehicles of incremental capacity in North America after 2013, with almost all of the output being added by Asia and Europe-based companies, IHS Automotive said last month.

VW Slides

Combined sales for Wolfsburg, Germany-based Volkswagen’s namesake and Audi brands fell 13 percent, matching the average estimate of four analysts. Deliveries of Volkswagen vehicles plunged 23 percent, while Audi sales climbed 15 percent.

Combined sales for Hyundai Motor Co. (005380) and affiliate Kia Motors Corp. fell 2 percent in December, missing an expected 7.2 percent increase, the average of seven analysts’ estimates. While Hyundai had a 6 percent volume increase, Kia’s sales dropped 14 percent, the companies said in separate releases.

A potential challenge for the broader industry will be to maintain pricing as additional production capacity comes on line, especially since inventory has climbed in anticipation of the first year of at least 16 million light vehicle sales since 2007. Industrywide supply of passenger cars rose to 1.8 million at the beginning of December, the highest monthly total since March 1996, according to Automotive News Data Center.

Chrysler said it finished 2013 with 508,615 vehicles, or 79 days supply. Ford said it had 639,000 vehicles, including medium- and heavy-duty trucks, for 73 days supply, up from 61 a year earlier. GM reported 748,125 vehicles in stock or an 81 days supply, down from 96 a month earlier.

“If you believe sales next year are going higher, and that we’re going to come into a very robust spring and summer sales cycle, a lot of the inventory concerns that are out there will dissipate very quickly,” said Erich Merkle, Ford’s sales analyst, last month in a telephone interview.

To contact the reporters on this story: Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net; Craig Trudell in Southfield, Michigan, at ctrudell1@bloomberg.net; Tim Higgins in Southfield, Michigan, at thiggins21@bloomberg.net

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


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