Import auto sales top Big Three
NEW YORK (CNNMoney.com) -- Sales plunged worse than expected at U.S.
automakers in July, allowing import brands to overtake their domestic
rivals for the first time, even as weak demand for autos spread to Asian
and European manufacturers.
Combined, the U.S. automakers - General Motors, Ford Motor and the
Chrysler Group unit that is being sold by DaimlerChrysler - reported a
19 percent decline in sales in July versus a year earlier, compared to
single-digit declines or even modest gains reported by most overseas
automakers in the period.
The sales left the domestic brands with only 48.1 percent of U.S. sales,
down 4 percentage points from a year earlier and off of the previous
low, set in June of this year, of 50.2 percent.
As a group Asian brands posted a 5.6 percent drop in U.S. sales but that
was enough to capture 44.6 percent of U.S. sales, according to sales
tracker Autodata. The European brands sales were off only 2.4 percent,
good enough for 7.3 percent of the market.
Overall sales were weaker than expected for both domestics and imports,
as total sales fell 12.3 percent.
Experts and some automakers pointed to concerns about the housing
markets and gasoline prices as weighing on American consumers who might
have been considering a auto purchases.
"No one was immune to this weakness in the marketplace," said Jesse
Toprak, executive director of industry analysis for sales tracker
Toprak said that while the victory by the import brands was not a
surprise, it was a significant benchmark.
"I think there's a psychological impact to being beaten on your own home
turf," he said.
But George Pipas, director of sales analysis for Ford, said that this
benchmark was not as significant as the one crossed in 2006, when the
Big Three lost the majority of cars bought by American consumers, as
opposed to total industry sales that include fleet sales to businesses
such as rental car companies.
Ford and the other U.S. automakers have deliberately cut back on the
less profitable fleet sales during the last year. Those sales are not
only sold for a lower price than retail sales, but they soon flood the
used-car market with low-mileage cars that push down their new car prices.
"At retail it (imports having more than half of sales) was true for all
of last year, and that's really the measure the growth of brands," said
Pipas. "This trend has been 30 years in the making."
GM spokesman John McDonald said that GM is pleased that its sales
improved from much weaker than expected results in June of this year, on
both the retail and overall basis.
"We're more interested in our retail performance, and how we're doing,
not how the overall industry is doing," he said. "Certainly we can do
better and we anticipate doing better."
Toprak said it was better for the U.S. automakers to cut out
unprofitable models that had little customer demand, as they have done
in the last year, than to blindly fight for market share while running
up large losses.
"Giving cars away will hurt you worse in the long run," said Toprak.
"Give credit to domestics that they realized that, and they're not
blindly going after market share. That's a bigger negative impact on
their brand image."
In an increasingly global auto industry, the distinction between
domestic and import brands is somewhat less useful than it once was.
Auto parts and components can be sourced around the globe and among
those automakers counted as import brands are those currently under
joint ownership with Ford, Chrysler as well as Saab, a unit of GM. The
major Asian automakers also make a significant percentage of their
vehicles for the U.S. market at North American plants.
But DaimlerChrysler is selling off Chrysler to U.S. investors, and Ford
is looking at selling its luxury European brands such as Volvo, Land
Rover and Jaguar as a way to try to raise cash for a turnaround. The
distinction between the traditional Big Three and their import rivals is
in some ways more relevant than it was only a year ago, when those U.S.
automakers had closer ties to import brands.
General Motors (Charts, Fortune 500) saw sales of cars and light trucks
fall 22.3 percent from a year earlier to 315,870 vehicles. That was
worse than the 18 percent decline forecast by sales tracker Edmunds.com.
Part of the reason for the drop was having one fewer sales day, which,
when taken into account, limited the daily sales rate decline to 19
percent. But every one of GM's brands lost ground. Car models dropped
26.8 percent, while sales of light trucks, such as SUVs and pickups,
fell 19.7 percent.
Ford Motor (Charts, Fortune 500) saw its overall sales plunge 19 percent
to 195,245 overall, with its U.S. brands - Ford, Lincoln and Mercury -
posting sales 20 percent lower than a year earlier. Edmunds had forecast
only a 10.5 percent drop in U.S. sales.
The declines at Ford were broad-based, as almost every model of car and
truck offered by the company saw sales lower than a year earlier, and
even some key new vehicles, such as the Ford Edge and companion Lincoln
MKX, saw sales decline from June.
"We know we have a lot of work to do, and July is a sobering reminder of
the economic and competitive challenges we face," Mark Fields, president
of Ford's operations in the Americas, said in a statement.
DaimlerChrysler (Charts), the German automaker that is in the process of
selling the Chrysler Group to U.S. private equity group Cerberus Capital
Management, reported that its overall U.S. sales fell 9.1 percent from a
year earlier to 156,314 vehicles. Edmunds had forecast a 7.3 percent
Chrysler Group sales led that decline, falling 8.4 percent to 137,728.
Mercedes Benz, the luxury European brand that will remain with the
holding company after the sale, saw its sales fall 14 percent to 18,586.
Chrysler Group's sales put it behind Honda Motor (Charts), even though
Honda also saw its sales decline, which puts Chrysler at risk of being
the No. 5 U.S. automaker once the sale of the unit by DaimlerChrysler is
complete. Before 2006, Chrysler or DaimlerChrysler had long held the
position as the nation's No. 3 automaker, but Toyota Motor (Charts)
passed it in terms of U.S. sales last year.
Toyota Motor (Charts) also posted a bigger than expected decline in
sales, as it saw them drop 7.3 percent to 224,058 vehicles. That was
bigger than the 3.7 percent decline forecast by Edmunds, but it was
enough to move Toyota ahead of Ford Motor for the No. 2 spot in U.S.
sales for July.
"The industry stumbled this month, on continued housing weakness," Jim
Lentz, an executive vice president for the Japanese automaker's U.S.
sales unit said in a statement. "Though Toyota didn't match last July's
record-setting sales, heightened demand for hybrids and crossovers is
Record gasoline prices have hurt sales of the U.S. brands over the last
year, as Americans turned to more fuel efficient models from the SUV's
and pickup trucks where the U.S. automakers still hold a clear lead.
In July importers also took a page from the Big Three's playbook and
offered increased incentives, such as cash-back offers and special
financing and lease terms, which created more sales pressure for U.S.
Edmunds.com estimates that the domestic automakers offered an average of
$3,268 on each vehicle sold in June as they tried to clear out the
supply of 2007 models to prepare for the new model year. That was up
$113 from June. European brands overtook the U.S. automakers, as they
upped incentives by $350 to $3,292 per vehicle.
The Asian automakers still offer more modest sales incentives, but their
offers got unusually aggressive by their standards. Toyota's incentives
reached $1,492 on average, up $92 from June and up 48 percent from
year-earlier levels. By comparison, GM and Ford trimmed their incentives
from year-earlier levels, according to Edmunds' figures.