US Auto Sales Hit Nearly Two-Year High

DETROIT September 3, 2003; Justin Hyde writing for Reuters reported that U.S. auto sales hit their strongest pace in nearly two years in August, as bountiful incentives and an improving economy lured buyers into showrooms. But two of Detroit's Big Three automakers lost ground to foreign competition, as Toyota Motor Corp. outsold DaimlerChrysler AG's Chrysler arm for the first time in the United States, and Ford Motor Co. reported a 13 percent drop in sales. August's seasonally adjusted annual sales rate hit 19 million vehicles, above last August's rate of 18.6 million vehicles and the highest since the record of 21.1 million set in October 2001. Total unit sales, adjusted for selling days, were down 0.8 percent from August 2002, U.S. automakers said on Wednesday.

"We think the consumer was feeling a little better about life, and also the nuclear incentives continued in the marketplace," said Gary Dilts, Chrysler's senior vice president of sales.

The results pushed General Motors Corp. to raise its third-quarter production, as its sales were down just 0.7 percent compared with last August's strong results. Paul Ballew, GM's director of industry analysis, called the industry's sales "sizzling."

"The ongoing aggressive pricing and incentives are certainly part of it," he said. "However, I would also stress there are increasingly clear signs of the recovery gaining some traction."

Even with strong industry demand, Ford suffered a rough month. Sales of its Ford, Lincoln and Mercury brands fell 13 percent, dragged down by weak car sales to fleets and poor minivan sales ahead of the launch of updated versions.

In contrast with GM, Ford cut its third-quarter car production, blaming the August power outages. George Pipas, Ford's director of sales analysis, suggested Ford was more restrained with incentives than GM or Chrysler. He said Ford was expecting better results once new models hit the market.

"There is no question that consumer demand for autos, particularly among individual retail customers, is increasing as we continue through the year," Pipas said.

TOYOTA ON TOP

As in past months, Detroit's Big Three lost market share to foreign automakers, especially Japanese makers, despite incentives averaging roughly $4,000 per vehicle.

Toyota said sales of its Toyota and Lexus brands were up 11 percent, with more than 200,000 sales in the month for the first time ever. Through August, Toyota is the most popular brand of passenger car in the United States, outselling Ford and GM's Chevrolet.

Toyota's results pushed it past Chrysler in monthly sales for the first time ever. Chrysler reported a 6 percent decline in sales; while its pickups sold well, its passenger car sales slumped 29 percent.

Dilts said Chrysler would post a better comparison with Toyota in the remainder of the year.

"Nobody's going to question the fact that Toyota is having a great run in the U.S. car and truck market right now," Dilts said. "Our primary focus is running our car business profitably."

Honda said its sales were up 11 percent, thanks to gains for its Accord sedan, Odyssey minivan and two SUV models, the Pilot and Element.

Nissan said sales were up 14.2 percent in August, thanks to strong sales of its Altima sedan and new Quest minivan, as well as a 59 percent boost at its luxury Infiniti unit.

Smaller foreign automakers also reported sales gains. Hyundai Motor Co. Ltd. (KSE:05380.KS - News) saw sales rise about 6 percent on an increase in small sport utility vehicles, while the Subaru unit of Fuji Heavy Industries Ltd. reported an 11 percent increase.

Volkswagen AG said sales fell 3.5 percent, while BMW AG said sales rose 7.2 percent.

Recent economic reports of higher consumer spending, growing manufacturing orders and rising personal income have all suggested the U.S. economy was rebounding.

But a continued lack of new jobs has held down consumer confidence and kept unemployment steady -- two factors that have traditionally driven demand for new cars and trucks.

There's little sign that automakers expect natural demand to pick up soon, as they continue to pitch rebates, cheap loans and other incentives at buyers. While some executives have suggested deals would decline with the 2004 model-year vehicles going on sale now, Chrysler and GM have already unveiled rebates of up to $3,000 on new models.

"In general, we feel more optimistic about the direction of the economy, the direction of the industry ... than we did a few months ago," Ballew said.