Advertisement

Vroom, Vroom : Vehicle Sales Zoom 9% in ’94; Record Big 3 Profits Seen

TIMES STAFF WRITER

Chrysler Corp., with its penchant for showmanship, used a storybook theme this week to introduce its 1996 minivan to the world’s news media at the North American International Auto Show.

Chief Executive Robert Eaton and President Robert Lutz, reading from oversize books and wearing homey cardigan sweaters, told the tale of the minivan--the vehicle that saved Chrysler from financial disaster in the 1980s.

Their story ended as a sleek new model suddenly appeared from offstage and appeared to fly through the air before coming to a stop. “We are jumping ahead of the competition,” declared the silver-haired Lutz.

Corny or not, the Chrysler unveiling was an appropriate symbol for the entire U.S. automobile industry.

Advertisement

1994 was truly a storybook year: Year-end sales reported Thursday show a 9% leap forward to 15.1 million domestic and imported cars and light trucks. Later this month, the Big Three are expected to post earnings that will far exceed the $11-billion record they set in 1988.

And more of the same is predicted for 1995. “This is going to be an excellent year for the U.S. auto industry,” said G. Mustafa Mohatarem, chief economist at General Motors Corp.

There is disagreement on how excellent. Chrysler, the hottest U.S. auto maker, predicts sales could increase another 5% to a near-record 16 million vehicles. Others say sales could be flat or up only modestly.

*

Advertisement

A lot will depend on whether the Federal Reserve Board continues to increase interest rates and, if so, by how much. There are also worries about rising car prices and production constraints.

At the same time, there appears to be plenty of pent-up demand as consumers seek to replace aging vehicles--older, on average, than at any time since World War II. And a bevy of strong new products--such as Chrysler’s redesigned minivan, Ford Motor Co.'s new Taurus mid-size sedan and Toyota’s RAV4 compact sport utility vehicle--should help lure buyers into showrooms.

Changing consumer tastes continue to reshape the industry. Light trucks--which include minivans, sport utility vehicles and pickups--continue to grow in popularity. More consumers are moving out of cars as they seek vehicles that make a different lifestyle statement and are roomier and more practical.

Chrysler and Ford both sold more trucks than cars last year. Overall, truck sales were up 13% in 1994 while car sales rose only 6%. The trend is expected to continue in 1995.

Advertisement

“The truck market is absolutely on fire,” said Ross Roberts, Ford’s general manager. “There is no end in sight to how far this segment can go.”

All the auto makers are converting some car factories to build more trucks. This year for the first time ever, the Big Three are expected to make more trucks than cars. Ford is betting on more buyers for its F-series pickups, and Chrysler will build more Dodge Caravans and Jeep Grand Cherokees.

The move to trucks is a bonanza for U.S. auto makers, who have more than 85% of the truck market compared to 65% of the car segment. Trucks generally are simpler to produce and therefore more profitable.

That helps explain why Chrysler has the best profit margins among the Big Three. It is estimated to earn more than $5,000 on each minivan, and it sold 513,000 of them last year. Sixty-five percent of Chrysler’s sales were trucks, compared to 57% for Ford and 39% for GM.

Advertisement

The strength of the truck market will help the Big Three report combined 1994 earnings of more than $13 billion--76% over the previous year’s $7.4 billion.

Analysts estimate that Chrysler’s ’94 sales of 2.2 million vehicles, up 8%, will yield a profit of about $3.5 billion.

“It was the best year in our 69-year history,” Eaton said.

Ford again won the crown for the most popular vehicles, with the Taurus topping the car list and the F-series pickup ruling the truck market. Overall, Ford’s sales increased 7.3% to 3.9 million vehicles. Its profit should exceed $4.5 billion for 1994.

Advertisement

*

GM’s sales increased 7.4% to 5.1 million vehicles, but it is having a more difficult time than its Detroit rivals. While the company will report a 1994 profit of $5 billion or more, most of that comes from non-automotive operations and overseas auto ventures.

The No. 1 auto maker said it will turn a profit in North America for the first time in four years. Still, slow factory changeovers, poor model launches and parts shortages for popular models are hurting sales and profit. Such problems led to a $328-million loss in North America in the third quarter.

Analysts estimate that U.S. auto makers lost about 275,000 vehicle sales because they could not make enough of the popular models. But Detroit--burned by overcapacity in the past--is reluctant to build new factories as a cyclical sales peak nears.

Advertisement

The result is that the Big Three lost some market share to Asian and European competitors. Detroit’s market share last year was 73.5%, down from 73.9% a year earlier. Japan’s share was flat at 23%, as the Europeans and South Koreans picked up the U.S. loss. The auto market was strong enough for virtually everyone to post improvement over the previous year, including Japanese makes whose prices have been driven about $2,000 higher than comparable U.S. models by the strength of the yen.

Among the major Japanese car makers, Nissan saw sales rise 12.2%, Honda 9.6% and Toyota 5%. Though their edge over Detroit has been dulled by various factors, analysts say they remain a competitive threat as they continue to cut production costs.

*

This is increasingly important as the competitive environment heats up and car prices rise to levels where affordability becomes a major concern. The number and quality of vehicles in each segment has grown in recent years. The average purchase price of a new vehicle now exceeds $20,000.

Advertisement

Big Three executives, however, say price increases are staying below the inflation rate. They argue that what has gone up is not prices but consumer demand for more expensive options.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

AUTO SALES DRIVE FORWARD

Total retail sales of cars and light trucks increased 9% in 1994. U.S. sales, in millions of vehicles:

Advertisement

1994

Light trucks: 6.1

Cars: 9.0

Total: 15.1

Advertisement

Note: Light trucks include minivans, sport utility vehicles and pickups.

THE HOT SELLERS

Ford kept the bragging rights in 1994 for the third consecutive year as maker of both the top-selling car and truck in America.

Cars

Advertisement

Model Number sold 1. Ford Taurus 397,037 2. Honda Accord 367,615 3. Ford Escort 336,967 4. Toyota Camry 321,979 5. Saturn 286,003 6. Honda Civic 267,023 7. Pontiac Grand Am 262,310 8. Chevrolet Beretta / Corsica 222,129 9. Toyota Corolla 210,926 10. Chevrolet Cavalier 187,263

Trucks

Model Number sold 1. Ford F-Series pickup 646,039 2. Chrevolet C/K pickup 580,445 3. Ford Ranger 344,744 4. Ford Explorer 278,065 5. Dodge Caravan 268,013 6. Chevrolet S10 pickup 250,991 7. Jeep Grand Cherokee 238,512 8. Dodge Ram pickup 232,092 9. Plymouth Voyager 211,494 10. Toyota pickup 204,212

Source: Automotive News, company reports

Advertisement


Advertisement
Advertisement