Automakers Eager to Move Past September's Tepid Sales
October 02, 2009

U.S. auto sales in September dipped to predicted lows because the Cash for Clunkers program ended in August and there weren't many buyers left, car company executives reported Thursday. They're just hoping that the market's massive "payback" via September's sales drought isn't extended into the fourth quarter.

Americans bought just 745,516 vehicles in September, a 23-percent drop from a year ago. That represents an abysmal Seasonally Adjusted Annual Rate (SAAR) of sales of just 9.2 million units - the lowest since February and roughly the laconic pace at which economically shell-shocked consumers  purchased cars during the first half of the year.

And it was far below -- 41 percent, to be exact -- the relatively breathtaking sales rate of 14.1 million units that prevailed for August, when most buyers took advantage of a total of $3.5 billion in rebates under the federal government's clunkers program and purchased more fuel-efficient vehicles. September's sales volume plunged by more than a half-million units compared with August.

"Ask any dealer and they'll tell you floor traffic was lousy all month, in every region for every brand," said Mark LaNeve, General Motors' North American sales vice president.

Added Ken Czubay, Ford's vice president of U.S. marketing, sales and service: "I've never seen a roller-coaster ride like this."

With September viewed as an aberration (in the wrong direction) of about the same scale as August's was a positive one, industry leaders and analysts were left mainly trying to read indicators concerning the near future.

"We're nearing the point at which the year-to-year [negative] comparisons are not so drastic - for the first time," said Jessica Caldwell, Edmunds.com senior analyst..

Don Esmond, senior vice president of automotive operations for Toyota Motor Sales U.S.A., foresees "continued steady improvement in the fourth quarter." Esmond predicted overall industry sales would rise to a seasonally adjusted rate in "the high 10s" early in the current quarter and then to "the low 11's" by year's end.

Toyota, Esmond said, foresees 10.4 million in sales for the entire year. This is essentially in line with projections by his counterparts in the industry. The overall rate for the third quarter was 11.5 million, after a 9.6-million rate for the second quarter and 9.5 million for the first quarter.

Edmunds.com forecasts sales for the full year to be 10.2 million vehicles.

"The Cash for Clunkers payback will be minimal in the coming months," said George Pipas, Ford's head of U.S. industry analysis. "We shouldn't be using it as an excuse. The economy will stand on its own."

Michael DiGiovanni, GM's head of global industry analysis, is "cautiously optimistic that we'll have a good fourth quarter."

Still, it isn't as if the U.S. economy is flashing "full speed ahead." As Emily Kolinski-Morris, Ford's chief economist, noted, conditions are "difficult to interpret" right now, and, "It's difficult to sort through the volatility."

For instance, while DiGiovanni noted that growth in the U.S. Gross Domestic Product for the third quarter was more than 3 percent, such positive indicators are still being offset by still-rising unemployment rates and ups and downs in the housing market. While the economy is "clearly starting to gain momentum," he said, "the recovery will still be bumpy."

Chrysler's Peter Fong said he believes that "the remainder of 2009 will continue to be a challenge for the U.S. automotive market." The president and chief executive officer of the Chrysler brand and lead executive for the sales organization, added, "Credit markets have thawed slightly, but still remain tight, and consumer confidence ... is tenuous."

Actually, auto company executives are dealing with a concern that the clunkers program may have so depleted inventories of desirable models that shortages could impede fourth-quarter sales. For that reason, some automakers goosed production plans slightly this fall for particularly hot-selling models.

But they largely dismissed tight inventories as an overall problem even in the wake of torrid August sales that reduced supplies on hand of some models to just a few days.

Esmond said Toyota "dealer inventories are still tight. We began October with ... only an 18-day supply. But we have a healthy pipeline in place and are optimistic that we'll improve soon to optimal levels."

"Inventories were depleted by Cash for Clunkers without precedent," Kolinski-Morris said. "There will be effects on some vehicle lines into October, but for the most part it will wash out quickly."

GM: We'll Do Better in October

Still suffering the hangover effects of its summer bankruptcy and Cash for Clunkers, General Motors sold 156,673 vehicles in September, its lowest level of sales since March.

For historical perspective, September sales were down 45 percent from a very strong September 2008 when the automaker's market share soared to about 29 percent, it's highest since 2005. A year ago, GM was celebrating its 100th anniversary with a sale, promoting employee pricing for everyone and selling a huge amount of fleet vehicles to make up for fleet sales lost during last summer's strike by supplier American Axle.

Still, before October 2008, GM sales hadn't slipped below 200,000 units for any month since at least 1991. And since October 2008, GM has had only one month that has exceeded 200,000 units - that being August during Cash for Clunkers.

That didn't stop GM from shining the best light on September that it could. "We had a strong performance given all we've been through - the bankruptcy and talk of bankruptcy, the phase-out of four brands and dealer restructuring," said GM's top analyst DiGiovanni.
 
GM's sales chief LaNeve blamed sluggish industry sales that were worse than he expected on Cash for Clunker hangover, floods in Georgia and still soft consumer confidence

Still, GM expected its market share to be up in September from August for the second consecutive monthly increase. And the automaker expects October will show a positive year-to-year sales comparison.

The other bright spot GM noted was the fact that the core brands that are moving forward with the new GM - Buick, Cadillac, Chevrolet and GMC - represented 90 percent of total sales and 90 percent of its retail sales. GM is winding down Pontiac, Hummer, Saab and now Saturn.

Buick car sales, led by the new LaCrosse and the Lucerne, rose 50 percent from August with total Buick sales up 10 percent.

Chevrolet's newest models are off to a positive start. GM's bread-and-butter division sold 6,900 Traverse crossovers, 6,800 of the redesigned Equinox crossovers and another 8,000 Camaro sports cars.

GMC's 1,334 sales of the new Terrain compact crossover were 183 percent more than in August.

GM saw positive signs in the hard-hit luxury market with Cadillac sales rising from August. Sales of the revamped SRX rose 105 percent from August. CTS sales rose 35 percent, DTS sales up 174 percent, STS sales up 29 percent and Escalade sales up 28 percent.

Cadillac's higher sales came at a price, with September incentives for the luxury make estimated by Edmunds.com at $9,233 for every vehicle sold - an all-time high for Cadillac. Particularly hefty incentives were on the XLR-V, which is being closed out with the help of discounts of up to $10,000 per vehicle.

However, GM pickup truck sales took a hit, off more than 60 percent from last September. As a result, GM, at the urging of its dealers, is re-instituting  "truck month" in October.

Ford: Continuing Momentum

Ford's September sales declined by 6 percent, to 109,939 units, although in important ways the third quarter as a whole was a watershed for the company.

Ford's third-quarter sales increased by 5 percent over a year earlier, and its U.S. market share increased by 2 percent. For the year to date, Pipas said, Ford's market share was 15 percent, up from 14 percent a year ago.

The company's incentive spending during the period also reflected Ford's burgeoning brands and products. It was down by an average of about $1,400 per vehicle compared with the third quarter of 2008, which Pipas said was about double the decline of the average automaker incentives for the period. Ford's Total Cost of Incentives (TCI) for the period, compiled using Edmunds.com's proprietary formula, was down by about 8 percent versus the same period in 2008.

Ford executives highlighted consumer interest in two vehicles as indicative of underlying demand that encouraged them about prospects for rising sales in the near term.

Their brand-new 2010 Taurus, for example, was fast out of the gate in September. Year-to-year sales increased 60 percent - compared with the tired re-tread of the Five Hundred model that Ford rebadged and was selling as the Taurus last year. And consumers "are selecting highly contented vehicles and technologies" in the new vehicle, Pipas said.

At the same time, demand for F Series pickups rose, with the line posting its second consecutive monthly sales increase. "These are not large commercial purchases," Czubay said, "but it's more individuals coming back to the market."

Ford also reported strong initial interest in its EcoBoost engine options, which it offers on a number of vehicles that boast equivalent performance, in more fuel-efficient smaller-displacement powertrains, to the previous generation of larger-displacement engines.

Caldwell of Edmunds.com predicted, "Increasingly, consumers will pay a premium" for EcoBoost engines as gas prices remain relatively stable.

Chrysler: Bottom of the Barrel

Chrysler reported September sales of 62,197 vehicles, a whopping 42 percent fewer than a year earlier, as the troubled automaker continues to deal with existential questions even after its bailout by the federal government and acquisition by Fiat.

The total was Chrysler's second-lowest sales for any month on record by Edmunds.com, barely edging the total of 61,747 units in January.

And even that level of performance came at great cost: According to Edmunds.com's TCI calculations, it had the highest level of spending in September of any major automaker, at an average of $3,769 per vehicle.

"While we had some bright spots in September, it was still a challenging sales environment for the industry," said Fong. "Low inventories of popular models at the start of the month hampered Chrysler, Jeep and Dodge sales; however, the company responded with increased production."

Among other moves, Chrysler also has responded by inching back into the leasing market for the first time in a year. And it has announced digital owners' manuals for all 2010 vehicles.

Toyota: Selling Everything It Makes

Toyota reported sales of 126,015 for September, a decline of 16 percent compared with a year ago. For the quarter as a whole, Toyota's sales increased 28 percent over the second quarter.

The company is quickly closing the U.S. sales gap with GM. In the first nine months of 2008, Toyota sold 619,362 fewer units than GM. But so far this year, Toyota has sold just 240,642 fewer units than GM. And Toyota is closing that sales gap while typically spending less than half of what GM spends on TCI.

Toyota Division posted September sales of 108,076 units, down 19 percent from last September.  The Lexus Division reported September sales of 17,939 units, an increase of 7 percent from the year-ago month.

Toyota car sales were led by Camry and Camry Hybrid, which posted combined September sales of 25,745 units. However, a huge part of the gain was accomplished by the biggest spike in Toyota's TCI since May, largely due to heavy incentive spending on the Camry line.

The Prius mid-size hybrid-electric vehicle posted September sales of 10,984 units. Only a seven-day supply of the vehicle remained at the end of September. "We could use a lot more Prius," Esmond said. "Prius has grown from a niche vehicle to one of our core volume vehicles."

Hybrids in general are "a very well-accepted technology now," he added. "Gas prices are swinging up and down but consumers are a lot more prudent in terms of their purchasing decisions. And that will get stronger."

Another example of Americans' embrace of Toyota-made hybrids was September sales of the new Lexus HS Hybrid. "It's doing very well," said Mark Templin, vice president of the Lexus division. The entry has become a "big success" especially in a handful of major metro areas including Los Angeles, San Francisco and Miami, he said.

Esmond said the September sales increase in part reflected the division's new products and partly reflected "more stability in the luxury market. And we plan to invest heavily in marketing" the luxury marque, "believing that the [segment] is about to recover."

Honda: Taking a Tumble

American Honda sold 77,229 Honda and Acura brand vehicles in September, a 20.1-percent decline from September year ago. Compared with August, during which Honda got a boost from Cash for Clunkers, sales fell 48 percent from 161,439 vehicles sold. And September was well below Honda's monthly average of 100,000 units this year.

Honda division sales fell 20 percent to 69,970 units, as sales of both cars and trucks dropped. Every model but the Pilot, which had a marginal increase, saw a sales decline.
 
Acura continued its tumble with sales of 7,259, down 30 percent. Every Acura posted a year-to-year decline. The MDX was the brand's best-seller with 2,220 sold.

Some Honda and Acura models had their worst sales month ever: Civic Hybrid, which is being supplanted by the new Insight; the S2000, which is being discontinued; the boxy and aged Element; and the Acura TL.

Nissan: Making Some Progress

Nissan's U.S. sales held up relatively well in September, declining by only 7 percent - second in performance among the big automaker's to Ford's. Nissan sold 55,393 vehicles during the month.

The company's TCI figure was $2,603 per vehicle for the month, according to Edmunds.com, within $50 of the company's average for the year.

The decline for the Nissan brand was only 6 percent, while Infiniti vehicle sales were 15 percent lower for September.

Sales of the Nissan 370Z were 53 percent higher in September, while the Nissan Rogue posted the best September on record, with sales of 5,089 units.

Hyundai Group: Up a Whopping 26 Percent

The Hyundai Group, which includes the Hyundai and Kia brands, posted a 26-percent increase in sales in September compared with a year ago. The two combined sold 53,134 vehicles.

Hyundai sold 31,511 vehicles for a 27-percent increase. The Elantra, a popular Cash for Clunkers choice, saw a 104-percent increase in September; the Santa Fe had a 50-percent gain. The Genesis continued strong.

"While consumer demand following the Cash for Clunkers program softened during the month of September, we are encouraged with our continued growth in retail share and overall sales through the first nine months of the year," said Dave Zuchowski, vice president of sales. "With our solid product and marketing plans going into the fourth quarter, in addition to the upcoming launch of the all-new Tucson and Sonata, we are cautiously optimistic during these challenging times."

September allowed Kia to close on its best quarter ever. Kia sold 21,623 vehicles for a 24-percent increase from a year ago. The Kia Optima midsize sedan and the new Forte compact sedan led the way, with the Soul and Rio chipping in as well.

"Consumer confidence in the Kia brand is on the rise, and on the heels of an all-time record sales month in August we continue our momentum by achieving the best sales quarter in company history," said Alex Fedorak, Kia director of public relations. "New designs, like the highly styled and personalized Soul, Forte compact sedan and Forte Koup, are appealing to a larger consumer audience while staying true to our brand's core pillars of value, safety and fuel efficiency."

The Hyundai Group is on pace for a record-setting sales year.

BMW: First Increase of the Year

For the first time this year, the BMW Group, including BMW and Mini, reported a year-to-year sales increase. BMW sold 19,175 vehicles, up 3.6 percent from a year ago.

The BMW brand, which offered some aggressive incentives, especially on its 6-Series and M6, had sales edged 2.1 percent higher to 15,047 vehicles in September. The automaker said X5 sales were limited due to a lack of inventory as sales of the diesel-powered X5 were better than expected.

"For now, we'll take this first small bit of good news, but the premium segment is not out of the woods yet as consumers keep on reacting cautiously to the mixed signals in the economy," Jim O'Donnell, president of BMW of North America, LLC, said in a statement. "For BMW, we expect the bumpy road to continue into next quarter in advance of 2010, when we see consumer confidence improving and a major launch of new BMW products start to hit the market."

Mini sales rose 9.7 percent to 4,128 automobiles, an increase of 9.7% compared to 3,762 sales reported in the same month a year ago.  

"September was another unique 'out of whack' month as many dealers reported fewer shoppers and tire-kickers after the end of the Cash for Clunkers program," said Jim McDowell, Mini USA vice president. "Mini has been fortunate to counter this climate with higher sales compared to last September and serious buyers helping the brand to continuously increase its market share."

For the year, the BMW Group has sold 179,219 vehicles, down 24.2 percent compared with the first nine months of 2008. BMW brand sales are down 26.3 percent to 144,223 vehicles; Mini sales are off 14 percent at 34,996 for the year so far.

Daimler: smart Sales Half of a Year ago; E-Class Boosts Mercedes

Daimler AG sold 17,799 Mercedes-Benz and smart vehicles combined, a decline of 13.4 percent from September 2008.

While Mercedes-Benz sales were off 9.6 percent from a year ago, September still marked the automaker's second-best month of the year. The redesigned Mercedes-Benz E-Class helped, with sales jumping by 28.4 percent from a year ago.

Daimler's smart division is struggling, selling a mere 814 cars in September for a 54.2-percent drop from year ago, its inaugural year.
For the year, Daimler has sold 147,834 vehicles, a 24.4 percent decline from a year ago. Mercedes sales are down 23.6 percent for the year; smart car sales have fallen 31.6 percent.

Volkswagen: Sales Rise a Tad

Volkswagen of America sold 17,358 vehicles in September for a 1.5-percent increase over a year ago.

The CC led the charge, with sales of 2,290 units for a 15.6-percent increase over August. It was the model's second best sales month ever.
The Jetta sedan and SportWagen posted sales of 9,568 units in September, up 8.5 percent from a year ago. Still, virtually every other model in the line was down substantially.

"Following such a strong month in August of this year, we are very pleased with consumer response to a number of Volkswagen's key nameplates during the month of September," said Mark Barnes, Chief Operating Officer, Volkswagen of America, Inc. "With the CC and Jetta all experiencing either month-over-month or year-over-year gains, we believe the brand is well-positioned for continued growth as we head into the fall months."

Volkswagen soon introduces the new diesel-powered 2010 Golf TDI.

Audi Sales Down, Share Up

Total sales at Volkswagen's Audi of America unit were down 9.6 percent in September, but president Johan de Nysschen predicted the brand's market share would again rise - as it has been all year. Audi projected its share of the luxury import sales would be 8.9 percent.

The Q5 compact crossover continues to be a breakout hit for Audi, with the company reporting the still-fresh-to-the-U.S. Q5 spends an average of just 13 days on a dealer lot. Audi moved a healthy 1,106 Q5s in September.

Other Audi models recording September sales hikes included the A3 (26.1 percent); the A5 (37.3 percent) and the R8 supercar (5.5 percent).

But offsetting those were a 15.7-percent slide for the best-selling A4 line, a 42.8-percent plunge for the midsize A6 and a 46.7-percent decline for the Q7 crossover, the very big brother to Q5.

And for the year, the Q7 and the TT line are off by a heavy 46.1-percent and 56.5 percent, respectively. Audi has moved just 1,493 TTs for the entire year.

Mitsubishi: Down 36 Percent; Inventories Low

Mitsubishi sold 4,712 vehicles in September, down 36 percent from a year ago, due to depleted inventories from Cash for Clunkers, the automaker said.

"The CARS program dramatically reduced our overall inventories," said Shinichi Kurihara, president and CEO of Mitsubishi Motors North America.  "Actually, the sell-down of Outlanders ideally coincides with the upcoming launch of the 2010 Outlander next month.

Mitsubishi executives are optimistic as the third quarter was the company's best for the year, up 18 percent from the first quarter and up 29 percent over the second quarter.

"We expected we would not reach the level of last month's sales. August was our best month in almost a year," said Shinichi Kurihara, president and CEO of Mitsubishi Motors North America. "The real measurement of ongoing progress and customer confidence are those three-month sales increases."

Jaguar Land Rover: Model Changeovers

Jaguar Land Rover North America sold 3,106 vehicles in September, a 14-percent decrease from September 2008.

Jaguar sales dropped 9 percent to 880 vehicles, though sales of the XF and XK rose. Jaguar this month begins rolling out the 2010 Jaguar XF Supercharged, the fourth member of the XF line.

Land Rover sales fell 15 percent to 2,226 units, despite a sales hike from the Ranger Rover HSE and SC models. The Ranger Rover Sport had its best sales for the past 12 months. Land Rover is launching the new Land Rover LR4 for 2010.

For the first three-quarters of 2009, Jaguar Land Rover sales are down 23 percent with Jaguar down 28 percent and Land Rover off 21 percent.

Porsche: Sales Up for a Change

Porsche Cars North America, which has been reporting year-to-year sales declines for much of 2009, reported an increase in September. The German sports car maker sold 1,581 vehicles in September, up 8.4 percent from 1,458 sold in September 2008.

Porsche sales were buoyed by the Boxster and Cayman, of which Porsche sold 326 compared with last year's 195, as well as the 911, up 40 percent to 720 vehicles versus 516 a year ago - the best sales for the year. The increases in sportscar sales were offset by declines of Porsche's Cayenne crossover.

For the year to date, Porsche has sold 14,310 vehicles, down 32 percent from 21,076 sold in 2008. -- Dale Buss, Contributing Writer, and Michelle Krebs, Senior Analyst and Editor at Large

Contributing to this report were Edmunds.com analysts Jessica Caldwell, Ivan Drury, David Greene

Posted by Michelle Krebs at 9:28 AM under Analysis , Chrysler , Companies , Featured , Ford , GM , Toyota | Comments (13) | digg this | Seed Newsvine

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