Big Three Is Now GM, Toyota, Honda
Toyota Motor Corp. passed Ford Motor Co. for the first time to become the nation's No. 2 auto seller in July, a brutal month for Detroit's automakers, which saw their combined U.S. market share sink to an all-time low.
Japan's top automaker beat Ford after posting a 12 percent gain in car and truck sales last month, a rise that coincided with a 35 percent plunge at the Dearborn automaker.
In another stunning development, Honda Motor Co. nipped past Chrysler Group to take the No. 3 spot in the U.S. market. Honda's sales rose 6 percent, while sales at DaimlerChrysler AG's Auburn Hills unit slid 37 percent from prior year levels inflated by employee discount offers.
While total industry sales fell 17.4 percent in July, domestic automakers suffered the biggest declines, as last summer's employee-pricing promotions took a toll and high gas prices cut demand for pickups and SUVs.
"We all expected the sales rates of the domestic brands to be down this summer from last year, but the sales rates were below our expectations," said Earl Hesterberg, a former Ford executive who is now CEO of Group 1 Automotive, a Houston-based dealer chain.
During Group 1's second-quarter conference call Tuesday, he said Detroit's automakers needed to find a way to spur sales. "I have been waiting for a number of months for the domestic brands to attack the marketplace. ... I just haven't seen it."
Among Detroit car producers, General Motors Corp. had the best month but still reported a 22 percent drop in demand.
Analysts had predicted that Toyota would eventually overtake Ford in the U.S. market -- as it already has at a global level -- but the change happened faster than most had expected.
Ford declined to comment, but company officials said privately the shift was not unexpected. Mark Fields, president of Ford's Americas group, has said the battle is no longer among the Big Three, but the Global Six.
GM, Ford and Chrysler have been joined by Toyota, Honda and Nissan Motor Co. as major players in the U.S. market.
For the year to date, Ford is still ahead of Toyota, and Chrysler remains ahead of Honda in U.S. sales. But Japan's automakers are benefiting from a perception among U.S. consumers that they offer more fuel-efficient cars and trucks.
Asian makers also stack up better in comparisons with July 2005 sales figures, while last summer's employee pricing bonanza is distorting year-over-year comparisons for the industry as a whole and for Detroit automakers, in particular.
At an annualized rate, July industry sales were tracking at 17.2 million vehicles, down sharply from 20.7 million a year earlier, according to Autodata Corp.
While the shuffle in July's U.S. market rankings may not be sustained for the full year, one analyst saw it as a sign of things to come. "It's clearly a warning bell," said Dave Hilton, senior manager of Capgemini's Automotive Practice in Southfield.
Results pile on to woes
The July results come at a time when Detroit's automakers are already bruised from staggering financial losses. GM and Ford are closing plants and eliminating thousands of jobs, reflecting their declining share of the market.
In July, Detroit automakers had a combined U.S. market share of 52 percent, a new all-time low, down from 61 percent a year ago.
At the same time, Asian carmakers continued their progress, ending the month with 41 percent of the U.S. market, compared with 33 percent this time last year.
Despite Detroit's dismal results, domestic automakers reported some bright spots.
"It was the best month since the launch for Pontiac G6, Chevrolet Impala and the Pontiac Torrent," said Paul Ballew, GM director of industry analysis.
"We are seeing very strong traction with these products."
July also was a strong month for small sport utility vehicles and midsize cars, he said.
But pickup sales plunged 34.5 percent overall, with domestic trucks suffering the biggest decline. Small, domestic-brand pickup sales dropped 44 percent, and large domestic truck sales fell 37 percent. Small SUV sales were up 8.3 percent, as consumers switched out of larger vehicles. Sales of larger SUVs fell more than 30 percent.
Chrysler officials said dealers were reporting that demand for big pickups and SUVs was increasingly limited to customers who need them for towing or other purposes. Chrysler's poor showing in July was all the more disappointing because the carmaker had reintroduced employee pricing to spur demand. Chrysler is extending employee pricing through August.
Big 3 to launch new cars
Detroit's automakers are preparing to roll out new vehicles later this year, including the 2007 Chevrolet Silverado pickup and Ford Edge crossover, to win back customers after six consecutive months of sales declines.
But if consumers don't respond, the domestics might never regain the ground they have lost, Hilton said. "If (these trends) continue through September, then we need to be very concerned."
While Detroit's automakers had expected a big drop in sales from last year's levels, they seemed at a loss to explain the double-digit declines that each experienced last month.
"It is what it is," said George Pipas, Ford's chief sales analyst.
Ford suffered from a 46 percent drop in July sales of its key Ford F-Series trucks compared with year-earlier levels.
But Pipas said the Ford Fusion, Mercury Milan and Lincoln Zephyr midsize cars performed strongly. "Demand for our midsize cars continues to grow."
Although Toyota and Honda fared well in July, Nissan Motor Co.'s sales slumped nearly 20 percent as the Japanese carmaker suffered from a lull in new model introductions. It plans to launch a slew of products, including a new Altima sedan, this year.
Sales of European brands fell 7 percent, with Saab and Land Rover posting the biggest declines.
Pipas said year-over-year comparisons weren't "instructive" because of the distorting effect of last year's employee pricing deals.
He also cautioned that year-on-year comparisons will not be helpful in September, October and November.
The U.S. auto market suffered a bad hangover last fall due to weak demand after the summer sales.
-- The brave might not live forever but the timid do not live at all