Automakers See Moderate Sales Rise
U.S. auto sales rose moderately in September and were nearly flat over the first three quarters compared with 2001, suggesting that consumers aren’t significantly worried over about economic malaise, turmoil in stock markets and the prospect of war with Iraq.
Sales of passenger cars and trucks rose 2.9% last month compared with September 2001, and the overall market inched up 1% over the first three quarters compared with the same period in 2001.
“The September University of Michigan [consumer confidence] survey shows that consumers continue to view vehicle buying conditions very favorably,” said Jarleth Costello, Ford Motor Co. senior economist.
Nonetheless General Motors Corp. saw its U.S. vehicle sales tumble 12.7% last month, while DaimlerChrysler’s Chrysler Group soared 18.1% and Ford rose marginally amid a market full of interest-free loans and other financial incentives to customers.
Industry analysts and executives expected sales to slow down in September, when GM suspended the no-interest loans in the first half of the month but reinstituted them for the second half.
“After a huge August, the slowdown in September demand was in line with our expectations,” said auto analyst John Casesa of Merrill Lynch.
“Our September sales performance was softer than expected,” conceded Bill Lovejoy, GM’s group vice president of North America vehicle sales, service and marketing. “However, when you consider our exceptional sales performance in July and August, lean inventories and the competitive environment, we expected there would be some weakening in September sales.”
Paul Ballew, GM’s chief market analyst, called September “a one-month aberration” and said it was not a reason to worry.
“I don’t read too much into it,” Ballew told reporters in a conference call. “GM sales were up 10% in the third quarter.”
GM has been churning out sales for more than a year since it introduced interest-free loans in September 2001 shortly after the terrorist attacks on the U.S., and the momentum was bound to slow.
“September last year was pretty remarkable, and the industry had taken some pretty dramatic steps to push sales, so I wouldn’t want to look at the year-over-year comparison as telling a story,” said David Garrity, an auto industry analyst at American Technology Research.
Chrysler’s leap isn’t surprising either, he said, noting the company’s profit and volume woes of last year and its late participation in no-interest loans.
The seasonally adjusted annual selling rate for September was 16.3 million units, up incrementally from 16.18 million vehicles in September 2001. Last year’s sales finished at 17.1 million, the second best on record.
“We are encouraged by the company’s improving market share trend,” said Jim O’Connor, group vice president of North America marketing, sales and service at Ford, whose sales rose marginally by 1.6% in September, excluding its European luxury brands. “This provides tangible evidence that we are starting to get some traction from our revitalization plan.”
But bad news for Ford came Tuesday from Wall Street, where UBS Warburg had harsh words for Ford’s turnaround plan and lowered its share price target from $9.50 to $7.
“We see no end to considerable operational problems that Ford Motor is facing today,” UBS Warburg analyst Saul Rubin wrote in a report. “A far more significant restructuring/resizing of the motor business than currently envisaged is inevitable, in our view, and the only question is when it will occur. The sooner the better.”
Ford lost $5.45 billion last year.
Ford nevertheless joined GM in offering expanded no-interest financing on 2003 models. GM is offering 60-month interest-free loans on most 2002 and 2003 cars and trucks or cash rebates up to $4,000 through the end of this month.
Ford is offering 36-month, no-interest loans on almost all its vehicles through Jan. 2, or rebates up to $2,000 on trucks and SUVs.
The interest-free financing represents considerable lost income to the automakers, which can make good profits from their financial arms. The rush of consumers to take advantage of the deals also draws away customers from subsequent months such as September.
Most other manufacturers reported generally improved sales last month over September 2001, but the comparison is skewed by the sudden drop-off in sales in the week following the Sept. 11 terrorist attacks and the subsequent flurry of incentives to lure consumers back into showrooms.
Over the first three quarters of this year, luxury imports showed modest to strong growth, with Infiniti up 21.8%, Lexus up 9%, BMW up 7.3%, Mercedes-Benz up 2.8%, Acura up 1.9% and Audi up 0.4%.
Other foreign brands were healthy: Mitsubishi up 14.1%, Nissan up 7.6%, Honda up 3.9%, Toyota up 3.5% and Mazda up 2.2%.
Korean brands continued their strong showing, with Hyundai up 14.7% over the first nine months of the year and Kia up 13.3%
Volkswagen was the only major automaker whose sales fell over the first three quarters, by 1.2%.
