Japan's Car Companies Resurgent In July US Sales, Ford And GM Caught With Hands In 'Cookie Jar'

 
on August 01 2012 3:51 PM
Toyota workers inspect the new Lexus ES vehicles at a Toyota plant in Miyawaka
Toyota workers inspect the new Lexus ES vehicles at a Toyota plant in Miyawaka Reuters

Like children caught with a hand in the cookie-jar of July's U.S. car sales, Ford Motor Company (NYSE: F) and General Motors Company (NYSE: GM) gave back some market share in July to resurgent Japanese automakers like Nissan Motor Co. (Tokyo: 7201), Toyota Motor Corporation (NYSE: TM) and Honda Motor Co. (NYSE: HMC).

Ford and GM both suffered from weaker fleet sales in July while Toyota, Nissan and Honda were finally able to begin fully feeding consumer demand after supply chain and inventory disruptions last year caused by the earthquake and tsunami in Japan and flooding in Thailand. Chrysler Group LLC, a subsidiary of Italian Fiat SpA (Milan: F), Volkswagen AG (Frankfurt: VOW) and Hyundai Motor Co. (Seul: 005380) all reported major U.S. car sales gains in July.

"A lot of it has to do with the starting points last year. Ford and GM saw share increases last year when Toyota and Honda had inventory problems in Japan," LMC Automotive senior VP for forecasting Jeff Schuster said Wednesday. "Now we're seeing the mirror of that."

While Ford and GM made easy gains in market share in 2011 following the natural disasters in Japan, Nissan, Honda and Toyota are now competitive again and are fighting to quickly regain U.S. market share. Inventory levels are now returning to normal for Japan's big three, allowing them to regain lost ground.

"With success growing along with inventory, it's wonderful to once again be able to meet the strong retail customer demand for our great Honda products," American Honda execuive vice president John Mendel said Wednesday.

As inventory levels return to normal for Toyota, Honda and Nissan, Ford and GM have struggled to keep up. "I think they [Toyota, Honda and Nissan] are taking back market share," Kelley Blue Book senior market analyst for automotive insights Alec Gutierrez said. "I think both Ford and GM have been treading water from a retail perspective."

Ford and GM both tried to account for poor July sales numbers by blaming low fleet sales, however, fleet sales are cyclical and are always low in July, so they would not fully account for a year-over-year change. Low fleet sales "are a contributing factor, but it's all relative, and I don't think it really accounts for all of it," Schuster said.

On the most basic level, Ford and especially GM have simply not been selling enough cars. GM now has a 79-selling day supply of vehicles, compared to an industry average around 65-selling days. If GM's sales do not pick up in August, production cuts are expected, according to Schuster.

While Toyota, Honda and Nissan reported double-digit growth in July U.S. car sales and Ford and GM slumped, Hyundai and Chrysler were insulated from the Japanese onslaught and continued to report modest sales gains. However, Hyundai is constrained by some of the lowest inventory levels in the industry, which are beginning to limit sales growth, and Chrysler has been relying heavily on incentives to sell cars.

While Hyundai has been able to grow sales on the strength of its product offering, "they don't have enough cars to meet demand," according to Gutierrez. Chrysler has been forced to offer incentives to keep pushing its flagship 300 and 200 sedans against competitors like the new Nissan Altima.

Industry-wide, 2012 is still on track for a seasonally adjusted annual rate of sales between 14 million and 14.5 million, but July came in slightly weaker (around 13.8 million to 13.9 million) according to Gutierrez.

"What we're seeing now is probably what we're going to see through the end of the year until the economy improves," Gutierrez said, adding that overall growth may be leveling off.

Chrysler Group LLC

Chrysler Group LLC, a subsidiary of Italian Fiat SpA (Milan: F), on Wednesday reported its best July U.S. car sales since before the recession.

Detroit-based Chrysler sold 112,026 cars in July, a 13 percent increase over the year before. July was the 28th consecutive month of sales gains for the company and the best July since 2007. All of Chrysler's brands experienced sales gains, with the biggest percentage increases going to the Chrysler and Fiat brands. Car sales rose 19 percent, while truck sales grew a more modest 11 percent.

Moreover, Chrysler Group recently reported its quarterly operating profits rose to $755 million, its highest quarterly profits in over a decade. Chrysler has experienced a strong recovery after its 2009 bankruptcy and acquisition by Fiat.

July's sales gains were indicative of Chrysler's "disciplined and methodical approach," according to Dodge Brand President and CEO and head of U.S. sales Reid Bigland. In 2012, Chrysler Group has been the only profitable division of Fiat.

Chrysler brand sales rose a whopping 35 percent, mostly on strong demand for the Chrysler 300 luxury flagship sedan. Chrysler 300 sales rose 41 percent in July. Chrysler's year-to-date sales are up 69 percent. July sales of Fiat brand cars rose 22 percent, demonstrating the ongoing popularity of the Fiat 500 line of hatchbacks.

The Ram Truck, Jeep and Dodge brands posted more modest gains. Ram Truck increased sales 15 percent in July, while Jeep gained 7 percent and Dodge gained 6 percent. Jeep was Chrysler's volume leader with 41,559 vehicles sold, but the Ram pickup truck was the best-selling vehicle overall with 23,824 units sold. Sales of the new 2013 Dodge Dart rose 282 percent over June as more vehicles began to arrive on dealer lots.

Chrysler Group had a 65-day supply, 341,699 vehicles, at the end of the month and projected a seasonally adjusted annual rate of 14 million.

Fiat SpA shares rose 0.03 percent to €4.03 ($4.96) Wednesday.

Ford Motor Company

Ford Motor Company (NYSE: F) reported U.S. July car sales were down 4 percent compared to the year before due to weak fleet sales.

Dearborn, Mich.-based Ford sold a total of 173,966 cars in the U.S. in July, down 4 percent from the previous year, despite the fact that retail sales rose 2 percent. The rise in retail sales was not enough to offset poor fleet sales, which dropped 16 percent.

Consumers continued to buy Ford's fuel-efficient EcoBoost F-150 trucks, which accounted for 42 percent of overall retail sales. Ford truck sales have been particularly robust due to increased contractor demand driven by rising new housing starts during the summer. The modest gain in retail sales was attributed to overall demand for fuel-efficient cars.

Ford Motor Company (NYSE: F) shares rose 1.63 percent to $9.34 Wednesday. Ford has been relying on North American profits to offset substantial losses in Europe in 2012.

General Motors Company

General Motors Company (NYSE: GM) on Wednesday reported July U.S. car sales fell 6 percent compared with the year before as retail sales fell modestly and fleet sales plummeted.

Overall July U.S. car sales fell 6.4 percent for Detroit-based General Motors, as retail sales declined 3 percent and fleet sales tanked 41 percent. Fleet sales traditionally decline in July, and the drop was indicated in the company's guidance. Ford Motor Company (NYSE: F) also reported a drop in fleet sales.

General Motors reported fleet sales to rental customers were "down sharply in July because planned deliveries occurred earlier in the year compared with 2011." Total fleet sales fell 15 percent in July, but government sales, primarily police cruisers, rose 115 percent.

General Motors particularly struggled to sell trucks in July. Mini, Small and compact car sales rose 41 percent, and retail passenger car sales rose 3 percent. However, truck sales plunged 12 percent. Overall, GM sold 201,237 vehicles in July, and sales of Chevrolet, GMC and Buick brand cars all declined. The only bright spot on the company's sales report was its luxury Cadillac line. However, year-to-date sales for the company are up 2.7 percent.

Despite the overall drop in car sales for the nation's largest carmaker, sales of Cadillac brand cars surged 21 percent on growing demand for the radically redesigned CTS, Escalade, SRX and XTS vehicles. New and redesigned vehicles were strong sellers for GM despite overall poor sales performance.

At the end of July, GM had a 79 day supply of vehicles, substantially higher than competitor Chrysler's 65 day supply. General Motors predicted a seasonally adjusted annual rate of sales of between 14 million and 14.5 million, in line with overall industry expectations.

General Motors Company (NYSE: GM) shares rose 1.37 percent to $19.98 Wednesday.

Nissan Motor Co.

Nissan Motor Co. (Tokyo: 7201) reported on Wednesday U.S. July Car sales up 16.2 percent over the year before on strong demand for cars, particularly the Altima and Rogue models.

Nissan sold 98,341 cars in the U.S. in July, a 16.2 percent gain over the year before when the Yokohama-based carmaker suffered supply chain and inventory disruptions from the earthquake and tsunami in Japan and flooding in Thailand. Japan's big three automakers, Nissan, Toyota Motor Corporation (NYSE: TM) and Honda Motor Corporation (NYSE: HMC) are all expected to report big sales gains in July as they continue to recover from the natural disasters. North American competition is heating up as the Japanese carmakers complete their reentry into the market.

Sales of Nissan brand cars increased 12.3 percent with 86,722 vehicles sold, while Infiniti brand sales soared 56.8 percent with 11,619 vehicles sold.

The core of Nissan's July growth came from gains in mid-sized car sales. Sales of the redesigned Nissan Altima rose 24.7 percent and accounted for over a quarter of total Nissan sales with 26,602 units sold. Nissan calls the redesigned Altima its "most innovative" ever.

Overall, cars made up over 50 percent of Nissan sales with 53,744 units, up 13.8 percent from the year before.

Sales gains by the Infiniti brand derived from high demand for the G Sedan, sales of which rose 88.8 percent to 6,078. The new massive 7-passenger luxury SUV, the Infiniti JX, also contributed 1,999 units.

Nissan Motor Co. (Tokyo: 7201) shares fell 1.48 percent to 733 yen Wednesday.

Honda Motor Co.

Honda Motor Co. (NYSE: HMC) reported on Wednesday July U.S. sales rose 45.3 percent to 116,944 as the Japanese automaker continues its robust recovery from last year's earthquake and tsunami in Japan and flooding in Thailand.

Sales of Honda brand vehicles rose 46.4 percent to 104,119 compared to the year before, while the company's Acura luxury marque increased sales 36.4 percent to 12,825.

"As our sales momentum continues to build through the summer, Honda is experiencing its best year-to-date sales in four years," American Honda Executive VP of Sales John Mendel said, adding that the company is once again able to fully meet consumer demand.

The Honda brand had its best July sales since 2008, growth which was driven by strong demand for the Accord and Civic, both of which posted sales gains great than 70 percent and accounted for 50 percent of Honda sales combined. Similarly, sales were up 47 percent for the CR-V and 88 percent for the Odyssey.

The Acura brand benefitted from a 142 percent increase in RDX sales while sales of the popular MDX grew 24 percent.

"With the MDX continuing its reign as the top seven-passenger luxury SUV, and the new RDX leading the compact luxury segment, Acura light trucks lead the way for the Acura brand," Vice Presdient of Acura sales Jeff Conrad said.

All of Japan's major automakers suffered from considerable supply chain and production disruptions following last year's natural disasters. Honda and the others have been working to regain U.S. market share in 2012 at the expense of American companies that gained as a result of the disasters.

Honda Motor Co. (NYSE: HMC) shares fell 3.46 percent to $30.41 Wednesday afternoon.

Toyota Motor Corporation

Toyota Motor Corporation (NYSE: TM) reported on Wednesday July U.S. car sales up 26.1 percent to 164,898 as the company continued to recover from last year's natural disasters. Toyota brand rose 36.7 percent to 146,663 while luxury Lexus brand sales rose 35.9 percent to 18,235.

Passenger cars, particularly the Camry, Corolla and Prius models made up about half of Toyota's sales while light trucks accounted for about a third. Toyota brand car sales grew 33.2 percent while light trucks gained 18.6 percent. Sales of Lexus brand cars grew 22.4 percent to 9,759 and SUV sales increased 29.1 percent to 8,476.

Hyundai Motor Co.

Hyundai Motor Co. (Seul: 005380) reported on Wednesday July U.S. car sales up 4 percent to 62,021 vehicles, the company's best July ever despite constrained inventory for the Korean automaker.

"July was another solid month for Hyundai with surging consumer demand dampened a bit by ongoing shortages of core products like Accent, Elantra, and Sonata," Hyundai Executive VP of sales Dave Zuchowski said Wednesday.

Sales declined slightly in July for the Accent, Santa Fe and Genesis, but the rest of Hyundai's line of vehicles more than made up for the losses.

While the industry average inventory is around 65 selling days, Hyundai has an inventory of less than half that with just 27 selling days worth of vehicles. Hyundai is preparing to ramp up production at its plant in Alabama by adding a third shift to boost inventory in August. Moreover, the company will soon ship its new Santa Fe vehicle produced in Georgia.

The expanded production in the Southern U.S. should help Hyundai "meet demand for our core products in the coming months," Hyundai Motor America CEO John Krafcik said.

Year-to-date sales for Hyundai are up 9.5 percent.

Volkswagen AG

Volkswagen AG (Frankfurt: VOW) reported on Wednesday July U.S. car sales rose 2.3 percent, the company's best July U.S. sales since 1973 during the hey-day of the VW Bus.

Wolfsburg, Germany-based VW sold 37,014 cars in July, a 27.3 percent increase year-over-year. Likewise, year-to-date sales are up 34.1 percent. The company has reported double-digit U.S. sales growth throughout 2012.

The Volkswagen Jetta continued as the company's most popular vehicles with 13,629 vehicles sold in July despite a 13.3 percent decline in sales of the model. The Passat was close behind with 9,007 units sold, an increase of 661.4 percent over the year before. Sales of the redesigned Beetle began to take off with 2,839 units sold and wacky marketing ploys like a "Volkswagen Beetle Shark Observation Cage" for Discovery Channel's "Shark Week" in the works.

Sales grew substantially for VW's larger SUV and crossover vehicles. Sales of the Tiguan rose 41.8 percent, while the Touareg gained 41.8 percent. Sales of the VW Routan fell 31.9 percent.

VW sales have benefitted from positive endorsements by J.D. Power and Associates and Motor Trend which designated the Passat the 2012 Car of the Year.

Volkswagen AG (Frankfurt: VOW) shares rose 0.51 percent to €129.45 ($159.15) Wednesday.

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