Auto Sales Still Dismal in August - But At Least It Wasn't July
September 03, 2008

By Dale Buss and Bill Visnic

U.S. auto sales fell by about 15 percent in August compared with a year ago, to approximately 1.25 million units from around 1.5 million units -remaining in their summer-long trough. And a chorus of OEM executives agreed on Wednesday that their forecast for the rest of 2008 looks just about as dismal.

But something else also appeared amid Wednesday's sales reports: reasons to hope that the U.S. market already has flattened out.

"It appears we may have hit the bottom in terms of consumer demand in July," said Jesse Toprak, executive director of industry analysis for Edmunds.com. "Because of factors like lower gas prices and generous incentive spending, we started seeing some improvement in August."

There was no sugar-coating the August results per se, nor the immediate outlook. "It's going to be as tough for the rest of the '08 calendar year, and we'll be managing our way through a different challenge every month," said Steven Landry, vice president of sales for Chrysler, whose 34-percent year-to-year decline in August sales was worst among the U.S. industry's Big Six producers.

Ford announced further production cuts for 2008 that in part reflected its nearly 27-percent sales decline for August. The company said it would strip 50,000 more units from a reduced second-half output schedule that it had just announced in July, cutting 20,000 more from the third quarter and 30,000 more from the fourth period. It now plans to produce a total of 890,000 U.S. vehicles in the latter half of this year.

The paring of production plans followed Ford's latest revision of its forecast for 2008 industry sales. The company now sees the U.S. market coming in at "the low end" of its previously forecast total of 14 million to 14.5 million vehicles.

Even Honda stumbled after managing largely to glide along atop the troubled U.S. market for most of 2008. American Honda posted a 7-percent sales decline for the month.

Silver Linings - or More Gray?

But as usual so far this year, one of the major Japanese makers stood apart from the other big OEMs with a sales gain for the month. For August, it was Nissan, which rode heavy incentives to a 14-percent increase compared with a year earlier, after also notching a year-to-year gain for July.

And reasons for hope were part of the industry's take on the monthly figures for the first time since at least the first quarter.

The main positive was simply that August represented a marked improvement over July, if not over August 2007. Industry-wide, August sales ran at a seasonally adjusted annual rate of 13.8 million to 13.9 million units, a significant improvement from the 12.6-million rate posted for July.

Talking last month about July, many industry executives had recognized the nadir they had reached. The selling rate was lower than it had been since the recession of the early 1990s, and the Detroit Three slumped to their lowest market share - 43.4 percent - in history.

But speaking on Wednesday about August results, many of these same executives - led by those at General Motors - adopted a cautiously upbeat tone. They ticked off some budding reasons for at least glimmers of optimism, factors that included an accelerating retreat in gasoline prices, slight improvements in U.S. economic fundamentals, and even some health in certain aspects of the auto business.

Plunging oil prices, now crashing toward $100 a barrel after peaking at $147 a barrel in mid-July, build consumer confidence, explained Michael DiGiovanni, GM's executive director of global market analysis. Other very recent improving signs for the U.S. economy, he noted, included the strengthening dollar, stabilization of industrial production, and the growing possibility that the American housing market and related credit problems have reached bottom.

"There are early indications of somewhat improving conditions out there," said Ellen Hughes-Cromwick, Ford's chief economist. "But the economy needs to recover to get some sunlight on the vehicle-sales outlook."

One crucial assist in any second-half improvement, Toprak said, could be the fact that automakers have so intensely adjusted to the sales decline and drastic shift in consumer demand to more fuel-economic vehicles over the last few months.

"Now they know what sells and what doesn't and have had the opportunity to realign their product mix," he said. "If they've come up with more optimal mixes for the '09 model year - which they're beginning to produce right about now - that should help the fourth quarter.

"We're hoping that July was the bottom and that we'll start seeing small but steady improvement from now on."

General Motors: Improving at Retail

By conventional standards, GM's August sales were nothing to write home about: at 309,000 units, they fell 20 percent short of year-earlier sales of 388,000 vehicles.

But GM executives made the case that their incentives-fueled sales performance in August actually was a lot healthier than those numbers implied.

For one thing, August a year ago represented a 2007 peak for GM in both overall sales and market share, as well as in fleet sales. So that represented a formidable comparison, especially because the company has trimmed fleet sales so far this year even more than the significant amount it already had anticipated.

The second reason GM was encouraged by August results was simply that they were 31 percent better than bleak July sales and the highest monthly total for 2008, even though August typically isn't the industry's strongest sales month.

"We've had a tough year," noted DiGiovanni, citing a major supplier strike and some local labor disruptions at key assembly plants on top of the gasoline-price shift and eroding economic fundamentals the entire industry has been dealing with.

"The worst may be behind us," he added. "With new products coming up like the [Chevrolet] Traverse [crossover in September], it gives us cause for optimism."

Of course, the return of GM's Employee Discounts for Everyone incentive deals were the main impetus behind GM car retail sales that actually improved by more than 1 percent over last August, as the company's overall retail sales declined by 13 percent.

As expected, GM announced on Wednesday that it is extending the incentive program through the end of September and making some 2009 models eligible for the discounts.

The Good

Chevrolet cars sold well, with the division posting its best sales numbers since September 2007. Malibu was the biggest gainer.

GM's Lambda-platform crossovers continued to sell well. Buick Enclave sales, in fact, were up 60 percent in August. The new Traverse joins the group this month.

The company sold 80,000 pickup trucks in August, most in that segment for a year. Overall, it reported signs of strengthening in pickup demand and sales as well as in full-size utility vehicles.

The Bad

Each GM brand saw double-digit sales declines, "led" by Hummer's 46 percent. GM, of course, is trying to sell the Hummer brand.

Though Chevrolet did well in cars overall, its smallest models didn't perform well. Aveo sales were down by 21 percent and declined by nearly 2 percent for the year to date. Cobalt sales fell 27 percent last month but are up nearly 10 percent for the year.

Toyota: Staying Down

Although Toyota Motors Sales USA's August wasn't as bloody as experienced by the domestics, there nonetheless were minus symbols all over Toyota's sales charts - total Toyota sales were down 9.4 percent versus last August, making it the worst for the company since August 2005.

There were some ugly dropoffs, but the one that likely remains most vexing for Toyota is the vaunted Prius hybrid-electric vehicle, for which availability of the imported model reportedly remains scarce. At 13,463 units, Prius sales were down 4 percent versus last August and remain off by 4 percent for the year.

Hybrid sales now are a robust portion of total Toyota sales, however. Toyota said sales for the Highlander Hybrid, at 1,277 units, increased by a rollicking 225 percent versus last August, and Toyota moved 3,456 units. In total, Toyota and its Lexus premium division sold 18,146 hybrids for the month, and with 185,051 hybrids sold through August, the company is tracking to surpass more than a quarter-million hybrid sales this year.

The Good

As might be expected, sales for Toyota's subcompact Yaris have gathered steam, apparently indicating consumers continue to be concerned about gasoline prices.

The Yaris subcompact jumped 21 percent in August and is up 32 percent for the year, but sales of the Corolla compact, Toyota's No. 2 seller after the midsize Camry, were down 3 percent in August and remain flat at minus 2 percent for the year.

As was the case in July, Toyota's larger SUVs continued with comparatively strong sales: the Land Cruiser, Sequoia and Lexus LX all enjoyed positive sales compared with last August, increasing 35 percent, 86 percent and 239 percent, respectively. The respective models also are up 89 percent, 38 percent and 191 percent for the year.

The Bad

Sales for Toyota's largest car, the Avalon, slid 41 percent in August to just 3,467 units - and year-to-date Avalon sales are down a significant 37 percent.

The Scion brand's tC coupe may be fading as a fashion statement, with sales off 32 percent in August and down 29 percent for the year. Increasing competition from other subcompacts also may be cutting into the Scion brand, although the 4-door xB and xD remain up strongly for the year.

At the Lexus unit, the only models to post positive August results were the entry-level IS (a 17-percent increase) and the previously mentioned LX SUV. Every other Lexus car or truck posted a decrease in August, led by a precipitous 44-percent plunge for the LS flagship, which also is off 37 percent for the year.

Apart from the solid 6,318-unit showing for the IS, perhaps the only bright spot for Lexus is that division sales increased some 24 percent versus an abysmal July.
 
Ford: Still Trying to Get the Mix Right

The company's sales fell by 27 percent in August, to 156,000 units from 212,000 vehicles a year earlier.

While offering plenty of incentives, Ford was somewhat handicapped by the lack of employee-price discounting to vie with GM. During the first big round of employee-price incentives, in 2005, Ford essentially matched its bigger rival. And earlier this summer, Ford began offering employee pricing on 2008 models of its F-Series pickup trucks.

But Ford also ran into another problem in August: continued constraints on supplies of its hot-selling Ford Focus small car. In May, amid fast-rising consumer concerns about gasoline prices, Focus sold more than 30,000 units.

Focus sales were restricted by supply - which Ford now is moving to boost - in July and August to little more than half May's level. Nevertheless, Focus sales rose 23 percent in August over a year ago and were up nearly 26 percent for the year to date, making it the company's best-selling car.

"We won't see a big improvement in the [Focus] inventory situation until we get into the fourth quarter, when sales are usually weaker on the absolute level," said George Pipas, Ford's head of U.S. industry analysis. "That should result in higher levels of Focus inventories and we would hope to pick up Focus sales levels at that point."

The Good

Sales of Ford's Escape SUV, a relatively fuel-efficient model thanks partly to revised engines and new transmissions, rose by 23 percent in August.

Ford reported it's doing a better-than-expected job of clearing out 2008 F-Series models, which offer thousands of dollars in incentives. Though production of the new 2009 model will start later than planned, in December, Pipas said that "when we launch it, we can concentrate on the product and its capabilities at the expense of continuing to try to ... merchandise ourselves out of an old-model inventory problem."

The Bad

Entire brands performed poorly, including Mercury, whose sales were down 32 percent in August, and Volvo, whose sales plunged by nearly half in August. Ford is changing leadership at the top of the Volvo brand amid persistent speculation it would like to unload the Swedish marque.

Overall, it was the worst August for the Ford brand since 2002, according to Edmunds.com research.

Chrysler: What Can You Say but 'Bad?'

Annus horribilis continued for Chrysler in August as it passed its first anniversary as a privately-held concern. August sales came in at only 110,000 units compared with 168,000 a year ago. And for 2008 to date, Chrysler sales linger 24 percent below last year's level.

Landry, Chrysler's sales vice president, perhaps justifiably racked up about half of the company's sales shortfall to the industry's general woes. But in August, he conceded, another huge factor in the company's sales difficulties was the fact that it shut down leases through its own financing arm.

Last August, Chrysler granted leases for about 24,000 of its own vehicles, Landry said - but only 2,000 this year. The company also was able to "transition" about 5,000 would-be leasing customers into retail deals.

"So we recovered [only] about 30 percent of the lease business we had last year," Landry said "That was the biggest difference for our company versus last August."

Unfortunately, little else improved in the attractiveness of its product line to consumers despite the fact that Chrysler offered an incentive program it called Shop 'Til You Drive, which offered up to 40 percent off sticker prices.

The Good

At long last, Chrysler was able to report for August some good news concerning customer demand for the minivans that it overhauled last fall. Chrysler Town & Country sales were up 15 percent, the van's best month since May. That may be a sign that the long-dissed minivan segment is making a comeback as consumers re-discover the vehicles' relatively strong fuel economy, spaciousness, and overall utility.

Chrysler is proceeding with the launch of its new Dodge Ram pickup and hoping that the industry begins to recover along with it. "The ramp-up of the '09 model is completely in synch with where we want it to be," Landry said, "and we'll have a nice balance of inventory between the old model and the new model by mid-October."

The Bad

All Chrysler brands are performing badly - Chrysler was down 44 percent in August, Jeep was down 44 percent as well, and Dodge was down 25 percent. August was the lowest volume Edmunds.com has on record for Dodge.

Chrysler beat out a surging Nissan in the U.S. market by fewer than 2,000 vehicles in August.

Nissan: Racking Up a Win

Nissan North America Inc. pumped up one of the industry's rare fine sales months in August, ramming through a 14-percent increase compared with August 2007. As was the case in July, Nissan was the only one of the Big Six automakers to post a sales increase in August.

Nissan says it sold 108,493 vehicles in August - a stunning 18,000-plus more than predicted by Edmunds.com analysis. And pickups and SUVs were at the vanguard of Nissan sales; the company's total truck sales jumped 33 percent versus last August. This was in unexpected contrast to Nissan's total car sales, which increased just less than 1 percent in August.

Unexplained except for the effect of incentives, perhaps. Edmunds.com analysts noted that Nissan deeply outspent its rivals in most market segments in winning a trend-busting record market share in July.

It's likely the same practice is at the root of Nissan's similarly contrarian performance this month. "Nissan had a huge amount of incentive spend (in August)," claimed one industry executive.

The Good

Nissan enjoyed a virtual blockbuster month for pickups and SUVs.

Signaling what may be trend experienced by other automakers for pickup customers selecting smaller models, Nissan's formerly slow-selling Frontier midsize pickup broke out with 56-percent leap in August, totaling 9,140 sales. The Xterra SUV, meanwhile, toted a whopping 77-percent increase with 8,208 units sold.

Even the Pathfinder SUV, which remains down for the year by some 32 percent, posted a 2-percent gain in August. And the barely-alive Quest minivan was resuscitated in August for an improbable 64-percent increase.

On the car side of the showroom, the redesigned Maxima flagship yielded a healthy 16-percent gain and the Sentra compact squeaked in with a 1-percent increase. Both were the only two Nissan-brand cars to record sales gains in August.

For Nissan's upscale Infiniti brand, the only two models to post sales increases were the G Coupe at 1 percent (although up for the year by a strong 59 percent) and the redesigned FX crossover at 27 percent, although with just 1,581 units sold in August, the FX remains distinctly in the niche category. Outselling the FX was the new EX entry-level crossover, at 1,645 units - there are no comparable 2007 sales figures because the EX was introduced just this year.

Bolstered by the EX, the Infiniti division finished August with total sales up by 8 percent, pulling to-date total sales to just 2 percent in arrears of last year.

The Bad

Yes, Nissan's trucks had a breakout month, strongly countering just about every industry trend.

But that doesn't mean things are exactly rosy: every Nissan truck remains starkly down for the year, some by debilitating amounts: Frontier, 13 percent; Titan, 41 percent; Xterra, 18 percent; Pathfinder, 32 percent and Armada, 41 percent.

Probably most worrying for Nissan is the performance of the heavily redesigned Murano midsize crossover, one of brand's strongest sellers throughout its entire first generation. In August, the Murano slipped 23 percent and is down 10 percent for the year - although of all Nissan's trucks, Murano's year-to-date decline is the smallest.

Also standing out: the 350Z slid 34 percent in August, dropping into three-figure sales territory by rallying just 906 buyers for the month. The sports car is down 41 percent for the year.

And although August was a good overall month, the only Nissan vehicles that, through August, are selling better than last year are the Versa, Sentra, Altima and G Coupe.

Honda Keeps to Single-Digit Decline

August was not particularly kind to American Honda Motor Co. Inc., which absorbed a 7.3-percent sales drop, but of the five automakers that make up the Big Six to lose ground, Honda lost the least.

With eight months of the year in the books, Honda essentially is treading water, reporting a tiny 1.2-percent increase over 2007 year-to-date sales, but 2008 so far has had one extra selling day, so Honda is running virtually even with last year's sales through August.

The Good

Civic Hybrid leapt to an outsized 47.7-percent increase in August and remains up 17.1 percent for the year. Meanwhile, the standard Civic continues to click with customers, gaining 5.3 percent compared with last August and up a healthy 14.2 percent year-to-date, with 264,138 sold through August - putting the Civic on pace to sell almost 400,00 units this year.

Honda's boxy new Pilot crossover seemed to get a little showroom traction, gaining 18.6 percent vs. last August - but Pilot still is trailing year-to-date by a substantial 17.2 percent.

The Bad

Apart from the Civic (plus Civic Hybrid) and Pilot, every other Honda and Acura-badged model - both car and truck - experienced a decline in August.

Acura probably had hoped its newly redesigned TSX entry-level sport sedan could sustain some momentum, but even though the car is restyled and reengineered, it still dropped 12.6 percent in August, but does hold a small 1.9-percent year-to-date lead over 2007.

The bread-and-butter Accord was off a meaningful 7.9 percent in August, but it, too, is running ahead of last year's pace, to the tune of 8.5 percent better than like-2007. The Accord is tracking to run up some 436,000 sales for the full year.

The highly-demanded Fit subcompact also recorded a gaudy 25.1-percent sales drop in August, but that likely is attributed to Honda's clearing of the final 2008 models in preparation for the all-new '09 Fit, which hit showrooms late in the month.

The Acura division was off 8.2 percent for August and is down a troubling 13.9 percent for the year. The RL flagship sold just 316 units in August (for a 39.5-percent plunge) and both the midsize MDX and compact RDX crossovers declined in August and are down for the year by significant margins - 12.5 percent for the MDX and 20.1 percent for the RDX.

Hyundai Drops

Hyundai Motor America said August sales dipped 8.8 percent in total.

Small cars led a decent pace: the Accent was up 17 percent and the Elantra gained 13 percent compared with August 2007. The midsize Sonata, usually carrying hearty incentives, posted a 17-percent increase.

Hyundai's crossovers and SUVs swooned, however, dragging on the gains of Hyundai's car line. The impressive new Genesis luxury sedan sold 1,177 examples in its first full month on the market.

Subaru: The (Up)-Beat Goes On

Something Subaru's doing looks right to fuel-price weary Americans. Subaru of America Inc. stayed in stride with the rest of the second-tier Asians for pulling in customers in tough times: Subaru's total of 18,932 units sold in August, a 14 percent boost over last year, and a year-to-date increase totaling 6 percent.

The company said the Forester crossover set an all-time sales record of 6,763 sales in August (a 73 percent gain), as did the heavily incentivized Legacy sedan at 2,402 units, a 24-percent hike over August 2007. The midsize Tribeca crossover dived 53 percent, to 862 units sold in August.

Despite Big Incentives, Mazda Takes a Hit

Even Mazda North American Operations, with the Mazda3 owner of one of the longstanding favorites of the compact-car segment, took it on the chin in August, dropping 4.4 percent compared with the same month last year.

In the midst of a heavily advertised across-the-board incentive program, the company said it enjoyed record sales for the Mazda3 (10,970), Mazda5 (1,324) and CX-9 (3,173), which represented gains of 4.4 percent, 39.7 percent and 41.4 percent, respectively.

Suzuki: Ouch

American Suzuki Motor Corp.'s grand-slam in August was the burgeoning SX4 lineup: the tidy-looking sedan/hatchback lineup posted an outsized 162-percent increase compared with August 2007.

Those gains, however, were offset by large declines for every other Suzuki model: the Grand Vitara slid 42 percent, the XL7 dropped 79 percent and the Forenza/Reno were off 51 percent - all leading to an August that dropped 32 percent for Suzuki and a year-to-date pace 5 percent adrift of last year.

BMW: Eking Out a Gain

BMW reported August sales of 30,900 vehicles, a 1-percent increase over 30,600 a year ago. But for the year to date, the leading German luxury maker remained down by more than 2 percent in U.S. sales volume.

And sales of BMW-branded vehicles declined 4 percent in August; now they're down more than 7 percent for the year. Analysts have partly attributed these results to a dependence on leasing that may be highest in its segment.

But the company apparently has begun pushing retail deals a bit more. "We are strong believers that the premium market deserves a choice of both retail financing and leasing," said Jim O'Donnell, president of BMW of North America, saying that BMW "work[ed] our APR programs to add a bit more value to the ownership equation [and to] get us a better balance with leasing."

Sales of the BMW-owned Mini brand continued to boom, with August sales of nearly 5,500 units, up 23 percent compared with a year ago.

Volkswagen: Jetta Takes Off

With a number of high-value small cars, Volkswagen of America should be well positioned to tap into the growing market of Americans who want fuel-efficient vehicles - but don't want to give up amenities.

August results ratified the idea that Volkswagen is stepping up to the possibilities. Its sales were more than 22,000 units, a 3-percent increase over August 2007 sales. For the year to date, VW was ahead by more than 1 percent.

Jetta sold the best for a month since May 2006, boosted in part by introduction of an all-new, 50-state-compliant clean-diesel Jetta TDI version. It is "selling about as fast as the dealers can get them," said Mark Barnes, chief operating officer of Volkswagen of America.

Mercedes-Benz: Faltering Brand

After spending most of the year in the black in terms of year-to-year sales comparisons, Mercedes-Benz saw its August sales dip to 18,500 vehicles compared with nearly 21,000 units a year earlier, for a decline of nearly 12 percent.

The company didn't offer explanations. But it noted that, for the year, Mercedes-Benz brand sales in the U.S. remained about one-half percent higher than in 2007.

The company's SmartUSA brand continued to roll up sales, retailing more than 2,400 vehicles in August for a year-to-date total of more than 16,000 cars.

Audi: Economic Headwinds

Citing "strong" economic difficulties in the U.S. market, Audi of America reported August sales of more than 6,400 vehicles, a decrease of 16 percent from a year earlier. For the year to date, Audi's sales here are down nearly 4 percent.

The company hopes the arrival of the all-new A4 sedan and wagon will generate incremental showroom traffic to pull Audi through the rest of the year. The new-generation A4 reputedly offers class-leading size and fuel-efficiency.

Porsche: Luxury Laggards

"Somber consumer sentiment" in the United States led Porsche Cars North America to sell only 1,400 vehicles in this country in August compared with more than 2,500 a year ago.

Sales of Porsche's cars were down a rollicking 60 percent compared with August 2007 and the Cayenne SUV was off by 7 percent, although Cayenne remains up by 4 percent year-to-date.

PHOTOS:

1. Malibu was one of Chevrolet's top performers in August, up 32 percent.

2. Toyota enjoyed robust sales for Highlander Hybrid.

3. Focus now Ford's best-selling car.

4. Chrysler Town & Country minivan revived in August.

5. Honda Pilot gains some traction in the showroom.

6. Subaru Forester set all-time sales record in August. 

 

Posted by Bill Visnic at 4:08 PM under Analysis , Chrysler , Companies , Featured , Ford , GM , Toyota | Comments (2) | digg this | Seed Newsvine

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