May Car Sales: Flirting with 10-Million SAAR
June 02, 2009

By Bill Visnic, Mary Connelly, Michelle Krebs

DETROIT - It's far too premature to break out the champagne and even too early to finally call the absolute bottom of one of the worst auto sales slumps in decades. But May sales reports from auto manufacturers in the U.S. hinted the worst just may be over.

"We saw glimmers of hope in May sales reports," said Jesse Toprak, executive director of Industry Analysis for Edmunds.com, parent of AutoObserver.com.

U.S. sales in May totaled 925,398 vehicles, a 33.5-percent decline from last May's 1,392,136.

Glimmers of Hope

So where were the glimmers of hope?

- The industry's Seasonally Adjusted Annualized Rate (SAAR) was the highest for any month this year at 9.9 million; February was the lowest at 9.1 million.

- May sales beat analysts' forecasts.

- The April-to-May sales increase at 13 percent outpaced the usual 9-percent lift.

- Some manufacturers reported their best month of the year; for some makes and models, it was the best month in a long time.

- Chrysler, in bankruptcy throughout May, and just-filed GM survived the month and actually sold a surprising number of vehicles.

- Ford and Toyota are upping production to meet anticipated higher demand in the second half of the year.

- Consumer confidence rose in May.

- The stock market, which correlates with car sales, is climbing.

"We believe the industry is in a bottoming-out process," said Bob Carter, Toyota Division group vice president and general manager. "We may be witnessing early signs of a slight rebound in the overall industry. . . A modest economic  recovery is on the horizon later this year, strengthening gradually until we get into 2010."

Added GM's top sales analyst Mike DiGiovanni: "We think we are starting to emerge from this global downturn. We feel pretty good about the second half of the year."

A Word of Caution

Still, no one is willing go out on a limb and declare the the slump absolutely over.

"It's very reasonable to assume we're fishing around the bottom and things are unlikely to get worse," said Edmunds.com's Toprak. But he wants to see three consecutive months of increasing SAAR before he is willing to declare the bottom has passed.

Plus: who would have thought the industry would be celebrating a SAAR of a relatively scant 10 million vehicles, when a year ago it was running at 14 million plus?

"Ten million is still a very weak level," reminded Ford's chief sales analyst George Pipas. He warned industry watchers not to read too much into May's numbers and to expect the market to be "very volatile" in the next 30 to 90 days because of an unstable economy and the impact of the Chrysler and GM bankruptcies on the market.

GM: Weathering the Bankruptcy Storm

So far, General Motors' sales are weathering its bankruptcy turmoil.

The automaker's sales fell 29.6 percent in May to 191,875 vehicles, compared with 272,363 in May 2008. And May's figure represented an 11-percent gain over April.

May was GM's best sales month in 2009 and its third consecutive month of sales growth.

"This gives us a lot of confidence that negative issues are behind us," said DiGiovanni. "People understand that General Motors is going through a reinvention."

A U.S. economy which may be slowly getting back on its feet aided GM. The consumer confidence index spiked significantly upward in May. Low fuel prices, although climbing slowly and steadily since December, are boosting truck sales. 

May is typically a strong sales month. And customers may have arrived in showrooms expecting a fire sale after GM announced plans to terminate dealers.

But GM pulled back on incentives in May from April. Per-unit spending in May totaled $3,783 compared to $4,107 in April. All of GM's brands reduced per-vehicle spending in May.

Chrysler's emergence from bankruptcy and the U.S. government's financial support have helped "desensitize" consumers to GM's bankruptcy, said Mark LaNeve, GM's North American sales and marketing chief. 

"It has become clear to the consumer that we are going to emerge from this," LaNeve said. "GM is going to be a viable enterprise."

"Six to eight months ago, I would have been in the camp terrified of revenue degradation" (due to bankruptcy fears), LaNeve said.

General Motors' car sales fell 37.7 percent in May to 81,009 units compared to 130,115 vehicles in May 2008. Truck sales declined 22.1 percent to 110,866 units versus 142,248 in the month a year ago.

Chevrolet sold 5,463 Camaros with no incentives. LaNeve described the car as "smoking hot."

He added: "The order intake from dealers is six times the production of what we can build." 

GM boosted retail sales performance over April. Chevrolet car retail sales rose 28 percent month over month; retail truck sales climbed 30 percent. GMC retail sales increased 17 percent from April. And the Buick Enclave and LaCrosse showed strong retail sales growth over April.

But GM's percentage of loyal buyers stood at 66.5 percent in May, the lowest since November 2008.

GM's second-quarter production forecast remains at 390,000 units, a 53-percent year-over-year contraction. May production is down 46 percent year-over-year.

At the end of May, GM inventory stood at 284,000 cars and 390,000 trucks. In May inventories were reduced by 67,000 units compared with April while sales only grew by 19,000 units. 
 
Ford: Cautiously Optimistic, Comparatively Successful

Saying its 24.3-percent decline in sales compared with last May likely would prove the best performance among the Big Six automakers (it was), Ford executives also highlighted a reduction in incentive spending and continuing cuts in inventories - not to mention the company's highest market share in three years.

Ford vice president of sales and marketing Ken Zubay said incentives were down an average of about $500 compared with last May - and that Ford might well be the only volume automaker to have reduced incentive spending yet increase market share for the month.

Ford-brand sales were off 25.5 percent compared with last May. The Mercury unit slid 24.8 percent (just 10,221 Mercurys were sold last month) and the Lincoln unit posted a sales increase of 2.4 percent.

Pipas focused on the strong performance of the 2010 Fusion lineup (apart from the fleet-oriented Town Car and Grand Marquis, the only Ford, Lincoln or Mercury vehicle to post a sales increase) and its burgeoning lineup of hybrid-electric vehicles, of which Ford sold a record 3,906 in May. The Fusion recorded a 9.4 percent gain; its 19,786 sales set a single-month record for the midsize sedan.

He noted the Mustang recovered somewhat, thanks to the first full sales month of the restyled 2010 model, but the 'Stang still dropped by 8.5 percent and is off more than 40 percent for the year.

One trouble sign in the car portfolio seems to be the Focus. The compact car, restyled last year but aging quickly, plunged 53.9 percent in May to 15,034 units and is down 46.2 percent for the year. Focus sales got a big boost at this time last year from skyrocketing gas prices.

Ford likely still continues to be vexed by truck sales, although it continues to reduce F-Series inventories. The F-Series slid 22 percent in May - a better performance than in recent months - but continues to be off 39.1 percent for the year.

Ford's SUVs and crossover sales also declined across the board, the best performance coming from the Escape compact crossover, which dropped just 7.2 percent, the worst number being posted by the Expedition, which slid 40 percent. Expedition is down almost 65 percent for the year and the fading Explorer is off 55.7 percent for the year.

May sales at Ford's up-for-sale Volvo Cars unit dropped overall by 22.9 percent. The only model to post a sales increase was the 9-percent climb for the S60 midsizer. The V70 plunged 73.8 percent (to 96 units) and the XC90 crossover endured a 55.2-percent drop and is off 62.6 percent for the year.

Through May, Volvo sold just 22,704 units - a 42.1-percent plummet. 

Ford launches a new incentive program for June, called "Drive the Ford Difference," - and although nobody at Ford says so, the program, which covers the buyer's first three payments, could be an answer to the "fire sale" prices consumers may see for certain GM and Chrysler models.

The Drive the Ford Difference will "get customers through the summer" without needing to make a car payment, said Pipas. Volvo also introduced a new incentive program that increases full-warranty coverage to five years/60,000 miles, which also includes all scheduled maintenance for that period.

Chrysler: What's That About Bankruptcy?

Chrysler executives said May's sales of 79,010 outperformed the industry on a retail-sales basis, despite the fact the company spent the month in bankruptcy. Chrysler's retail sales decline of about 30 percent was better than the industry average, said Steven Landry, executive vice president - North American sales and marketing.

Chrysler also managed to increase its retail market share, Landry said, from nine percent in May 2008 to 9.6 percent this May. This despite the fact the company's incentives decreased from $4,383 in April - the month leading up to Chrysler's bankruptcy declaration - to $4,159 in May.

"We feel very good about our sales this month," said Landry. "Our showrooms were busy despite the restructuring of our company."

But apart from a few positive points - Jeep Wrangler continues to be a bright spot, and inventories have been reduced to an 86-day supply - Chrysler's overall sales slid 47 percent, thanks largely to virtually no fleet sales, said Landry. In May 2008, Chrysler had 41,000 fleet sales; this May, just 4,000 vehicles went to fleet buyers.

Jeep Wrangler, outselling last year's May total by 34 units, was the only Chrysler vehicle with a positive sales performance. The company sold just 18,046 cars in May, a gaudy drop of 57 percent compared with the 42,124 cars it sold in May 2008.

Model-by-model, there were some decidedly outsized decliners. Chrysler Sebring slid 72 percent to less than 2,000 units, Jeep Compass and Patriot were off 70 percent and 71 percent and Dodge Caliber plunged 76 percent.

On the truck side, the Dodge Dakota dropped 76 percent, Durango declined 56 percent and Chrysler's Town & Country minivan dropped 38 percent. Town & Country's Dodge Caravan counterpart plunged 59 percent.

The Chrysler brand declined a worrisome 51 percent, the Jeep unit slid by 40 percent - including a 50-percent drop for the Grand Cherokee - and the Dodge brand was off by 48 percent.

Landry said the company's June incentives essentially will mirror what had been available for May, with extra cash for certain models and model-year vehicles. And he said the mechanisms for GMAC to take over retail financing for Chrysler are almost entirely in place, meaning June will allow Chrysler to offer 0-percent financing for 60 months through GMAC for select '09 models.   

Toyota: Prius Kick-Off

Toyota will add 65,000 units of production in the United States in response to cautious optimism about the country's economic health.

Toyota Division's Carter said the hints of an economic rebound have prompted the automaker to build "to build some incremental volume back into our plans."

The 65,000 incremental units will begin arriving later this summer, Carter said. Carter specifically cited increases in the Camry, Corolla, Sienna, RAV4, Tacoma and Tundra. "It is a mix of cars, trucks and SUVs and even niche series," he said. 

Toyota sales in May improved 20.6 percent over April 2009. But compared to May 2008, volume fell 38.4 percent to 152,583 vehicles compared to 257,406. It is the second consecutive month that General Motors and Ford beat Toyota in sales.

Toyota leaned on incentives in May. Per-unit incentives totaled $1,755, a $121 increase over April 2009.

Carter said Corolla and Camry sales in 2009 are being measured against exceptionally strong numbers in May 2008 when steep gas prices influenced buyers. Corolla sales fell 53.7 percent in May to 23,576 units compared to 52,826 in May 2008. Camry volume declined 36.6 percent to 31,325 vehicles versus 51,291 a year ago.

Toyota sold 14,846 hybrids in May, more than Hummer, Mini, Porsche, Saab, smart and Suzuki combined in the period.

Sales of the 2010 third-generation Prius began during the last week, Carter said. "The 2009 models are virtually gone," Carter said. "There are less than 2,800 units in stock nationwide."

The 2010 Prius will be available in greater numbers than its predecessors, he said. "We have significant volume of product coming to the U.S.," Carter said. The company has recorded more than 128,000 so-called hand-raisers interested in product information at its website, Carter said.

National advertising will focus on the Prius this month, he said.

Lexus division sales fell 33.9 percent to 16,922 units from 26,593 vehicles in May 2008. Cars declined 46 percent to 8,477 units versus 16,290 a year ago. Trucks were off 14.9 percent to 8,445 vehicles compared to 10,303 in May 2008.

The Scion xD was Toyota's worst year-over-year performer. Sales dropped 74.5 percent to 1,065 vehicles from 4,337 units a year ago.
 
Honda: Enduring A Rough May

Honda's highlight for May: sales of hybrid-electric vehicles were up, thanks to the availability of its new Insight compact hybrid.

Some of Honda's outsized-looking sales decline of 39.2 percent is attributable to the fact the company had its best month ever in May, 2008, note data analysts at Edmunds.com. But even by comparison, last month was not kind to Honda.

Sales of the brand's two backbone models, the Civic and Accord, were down 59.6 percent and 46.3 percent, respectively. Of course, no way was Honda going to match Civic sales of some 50,000 units last May when gas prices began spiraling upwards.

The typically strong Fit dropped by 27.5 percent. The new Insight, with no comparison sales figure, added 2,780 units to the bottom line. The Honda division was down 3.6 percent even compared with April, a metric several automakers were at least able to improve.

Honda's total car sales plunged by 48.9 percent. Trucks dropped a less-troubling 19.4 percent, and the Acura upscale division was off 34 percent, although it did manage to marginally improve sales compared with April.

Likely reflecting an incentives focus on trucks, the Odyssey minivan dropped just 2.9 percent and the Pilot midsize crossover slid a comparatively healthy 8.9 percent. The Ridgeline dropped 56.6 percent, however, and the aging Element declined by 46.7 percent.

At Acura, the RDX midsize crossover and the TL sedan had their best month so far this year, although Acura's RL flagship moved just 169 units, a 55-percent plunge. Acura's entry car, the TSX sedan, also slid a large 43.9 percent.

Nissan: Better than April

Nissan North America saw sales decline 33.1 percent to 67,489 units in May compared to 100,874 vehicles a year ago. But that volume was a 43 percent increase over April.

Nissan hit a record estimated incentive cost of $2,790 per vehicle in May, outspending both Honda and Toyota and coming very near to the outlay at Hyundai/Kia.

At Nissan division, sales declined 32.5 percent to 60,993 vehicles versus 90,379 in May 2008. But that showing was a 44.3 percent increase from a dismal April.

The new Cube added 1,745 units to the bottom line in May. Maxima had its best month since September 2007, although incentive spending topped $3,000 per unit. Maxima May sales totaled 6,082 units. Rogue sales climbed to 8,287 - a record. But estimated incentives also hit a record high at $1,692 per vehicle.   

Sales at Infiniti dropped 38.1 percent to 6,496 units compared to 10,495 vehicles a year ago. That volume is a 31.7 percent lift from April. Only the G sedan sold more than 1,000 units in May.

Hyundai Group: Buoyed by Genesis, Soul

South Korea's Hyundai Group, including Kia, reported the smallest decline of the Big 7 in May. Combined, Hyundai and Kia sold 62,997 vehicles in May, a 19-percent decline from a year ago.

May marked the fifth straight month of Hyundai Group grabbing at least seven percent market share. Still, the automaker remained in the No. 7 spot behind Nissan, after last month jumping ahead of the Japanese automaker.

Edmunds.com's Toprak warned of some troubling aspects to Hyundai's performance. While Hyundai Group cut incentive spending by $500 between April and May, it still is up $1,000 from a year ago. And within Hyundai Group's sales report, 24 percent of its volume is coming from aging leftover 2008 models, far above the industry's 8-percent average.

The Hyundai brand sold 36,937 vehicles, up 20 percent from 46,415 a year ago. Hyundai's strength came from its just-launched Genesis and Elantra Touring.

"Record sales of our new Genesis and Elantra Touring models, and continued strength of core models like the Alabama-built Sonata and Santa Fe, lifted our retail market share to its highest level of the year," said Dave Zuchowski, Hyundai Motor America vice president of national sales. "What's even more heartening for us is that May marks the fifth consecutive month of year-over-year monthly retail share gains, even as we've been steadily reducing our incentive spending."

Kia sold 26,060 vehicles, a drop of 16 percent from 31,047 a year ago. Kia's strength came from its newly-launched Soul: the automaker sold 3,855 of them.

"Soul continues to exceed our initial sales expectations and has attracted new customers to our showrooms," said Michael Sprague, Kia Motors America's marketing vice president "As we head into summer, our vehicle line will turn more heads with the stylish additions of the Forte compact sedan and Forte Koup, arriving in dealerships soon."

Mazda: New Mazda3 Strongest Model

Mazda North America sales tumbled 40.1 percent in May compared to a year ago.  Volume totaled 16,718 units in May 2009 compared to 27,921 in 2008.

The Mazda3 notched the strongest sales for the brand. Volume totaled 7,500 units, a 41.4 percent decline from 12,788 units a year ago.

Mitsubishi: 58-Percent Drop

Mitsubishi sold 4,352 vehicles in May, a 58-percent decline from a year ago but up 11 percent from April.

Mitsubishi's volume leader was the Lancer, which saw a sales hike of 20 percent from April.

"We are encouraged by the strength of our distinctive Lancer and Outlander models, which have been consistent performers this year," said Mitsubishi's North American Executive Vice President of Operations John Koenig. He noted the Lancer Sportback is added to the fold in summer. 

Suzuki: Stunning Nosedive

American Suzuki sold a scant 2,528 vehicles in May, a stunning 75-percent decline from 10,364 a year ago. 

Grand Vitara sales were down 41 percent; Suzuki SX4 sales were off 71 percent. Suzuki sold 314 Equator models, a pickup based on the Nissan Frontier. Suzuki has phased out other lines that it had a year ago.

Volkswagen: Best Diesel Month

Volkswagen of America, Inc. sold 19,568 vehicles, a 12.4-percent decrease from May 2008.

The German automaker, which is heavily promoting clean diesel technology, had its best sales month for its diesels since their launch last year. Volkswagen sold 3,862 diesel models.

Volkswagen's volume model, the Jetta, posted its best sales month since August 2008 with sales of 8,992 units. The Jetta SportWagen had its best sales month since its launch last year with sales of 1,605 units.

The CC, launched this year, chipped in 1,419 sales. The Routan van, based on Chrysler's minivans, added 1,390 sales. The Tiguan had sales up 67 percent.

Still, Volkswagen had plenty of models in its line with hefty double-digit declines, including the Rabbit, New Beetle, Eos, Passat and Touareg.
 
"In this challenging economy, Volkswagen is pleased with our May sales results," said Volkswagen of America COO Mark Barnes "We're really encouraged by how well our Jetta sedan and SportWagen did in May, and equally excited by how well our TDI clean diesel models continue to sell," added Barnes.

Audi Hangs Tough

Audi of America Inc. rang in with a comparatively healthy overall sales decline of just 12.1 percent in May. Audi retailed 7,503 vehicles.

Audi's sales were led by a 59.5-percent hike for the A5 coupe, the only Audi model to record a sales increase. But the Q5 compact crossover, new to the lineup this year, added 1,413 units to the company's total and so far has posted a respectable 4,377 sales so far this year.

Big decliners for Audi included a 63.7-percent plunge for the TT line (to just 182 units), a slide of 46.8 percent for the A8 flagship and even a drop of 27.9 percent for the nearly new near-exotic R8 roadster, from 61 units in May, 2008, to 44 units this May. The R8 is down just 2.2 percent for the year, however.

Jaguar, Land Rover: LR2 Is Volume Leader
 
Jaguar Land Rover North America sold 3,391 vehicles in May, a decline of 29 percent from the 4,760 sold in May 2008.

Land Rover sold 2,223 vehicles, a 26 percent drop from 3,003 in the month a year ago. Jaguar sales fell 34 percent to 1,168 units from 1,757 in the year-ago period.

Land Rover U.S. sales in May increased 8.8 percent from April 2009, the company said. Jaguar volume in the U.S. decreased 0.8 percent from April 2009, the company said. Combined, the two brands eked out a .02-percent sales increase in May from April 2009.

"May sales for both the Jaguar and the Land Rover brands in the United States once again surpassed our internal objectives, helped us hold or gain market share and positioned us well for the upcoming launch of exciting new 2010 model year vehicles," Gary Temple, company president, said in a prepared statement.

  A 23-percent increase in LR2 sales - to 613 units from 500 in May 2008 - led the volume at   Land Rover. "We are well positioned for the arrival of the enhanced LR4, Range Rover Sport and Range Rover models," Temple said.

At Jaguar, sales of the XK coupes and convertibles fell 13 percent to 243 units versus 279 in May 2008. Other nameplates fell more sharply.  The XJ dropped 45 percent to 127 units from 229 in the month a year ago. The XF declined 32 percent to 790 vehicles versus 1,170 in May 2008.  

Earlier this year Jaguar said a limited edition XFR and the next-generation XKR coupe and convertible will arrive in the 2010 model year. At year end, Jaguar will launch globally the XJ luxury sedan.

BMW: Best Month This Year

Sales at the BMW group fell 27.7 percent to 22,993 vehicles from 31,781 a year ago.

But the BMW brand said May volume was its best this year. "This month, the northeast and Midwest showed signs of buyer's interest and that's a positive aspect for the whole premium market," said Jim O'Donnell, BMW of North America LLC president. 

BMW brand sales totaled 18,383 vehicles in May, a decrease of 27.8 percent compared to volume of 25,469 in May a year ago.

"We have been seeing all year customers remain cautious," O'Donnell said. "When they shop for premium products they are buying brands that have a history of value, dependability and enduring quality. This has helped sales in our core 3 Series, 5 Series and X5 range."

Sales of BMW cars dropped 25.6 percent to 14,785 units from 19,884 vehicles in the period a year ago. Volume of BMW light trucks was off 35.6 percent to 3,598 units from 5,585.
The Mini brand sold 4,610 units in May, a decline of 27 percent from 6,312 units in May 2008.

Daimler: Lower Sales Despite Rich Incentives

Daimler sold 16,303 Mercedes-Benz  and smart-branded vehicles in May, a 33.4 percent decline compared to 24,480 units in the month a year ago.

Mercedes, which in a highly unsual situation offered the highest incentives in May of any brand tracked by Edmunds.com, sold 15,134 units, down 30.5 percent from 21,785 vehicles a year earlier. Sales of smart cars were off 56.6 percent to 1,169 units in May 2009 versus 2,695 in May 2008.

The C-Class (4,842 units), E-Class (2,275) and M-Class (2,021) led the sales volume at Mercedes, the company said.  

Porsche: Sports Cars Socked Again  

Porsche sold 1,979 vehicles, a 29 percent decline from the same month a year ago when sales totaled 2,796 units.

Sales of the Boxster and Cayman dropped to 410 vehicles versus 772 units in May 2008. The 911 fared better. Volume totaled 706 units in May 2009 compared to 832 vehicles in the period last year. Sales of the Cayenne SUV fell to 863 units versus 1,192 in the month a year ago.

Edmunds.com analysts Jessica Caldwell, Ivan Drury and David Greene provided the analysis for this report.

Graphic by Robert Holland

Photos by Manufacturers

1 - Chevrolet Camaro

2 - Ford Fusion Hybrid

3 - Jeep Wrangler

4 - Toyota Prius

5 - Honda Civic Hybrid

6 - Nissan Cube

7 - Mazda3

8 - Volkswagen Jetta Sportwagen

9 - Land Rover LR2

10 - Porsche Boxster

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