Used to send a weekly newsletter. To subscribe, email me at

Thursday, August 02, 2007

Auto sales plunge in July - Makers, observers differ on reason

Auto sales plunge in July - Makers, observers differ on reason
By Rick Popely
Copyright © 2007, Chicago Tribune
August 2, 2007

Automakers blame high gas prices and sagging housing prices for a 12 percent decline in new-vehicle sales in July that encompassed most major manufacturers. Industry observers also suggested another culprit: Fewer consumers may need or want a new car.

The widespread decline included Toyota Motor Sales U.S.A., which routinely reports double-digit increases but saw a 7 percent setback in July, to 224,058. That was still enough to place second, behind General Motors Corp.

GM fell 22 percent, to 315,870, Ford Motor Co. fell 19 percent, to 194,097, and Chrysler Group 8 percent, to 137,728. The U.S. market share held by the three domestic-based manufacturers fell below 50 percent for the first time, coming in at 49.5 percent for the month.

Nissan North America was among the few to buck the trend, gaining 2 percent, to 87,877.

For the industry it was the sixth sales decline in the last eight months. The Power Information Network, the data gathering unit of J.D. Power and Associates, is one of those betting that's because consumers are hanging on to cars longer.

The average age of vehicles traded for new models in the second quarter was 5.4 years, up from 5 in the second quarter of 2004, according to transactions at 7,000 dealerships around the country.

Power statistician Tom Libby attributes that to higher quality. "Ten years ago some brands had quality scores that were much worse than average. Now, the band [from best to worst] has narrowed," he said.

Former Chicagoan Dale Shipman agrees. Shipman leased a new car every two or three years for about two decades but took a hiatus in 2005 after he and a partner launched an information technology consulting business, the budget of which did not allow for a car payment.

So he began driving a 1998 Dodge Grand Caravan that now has 150,000 miles. It runs well and gets 28 miles per gallon on the highway, he says, so there is no urgency to trade it in.

"There's no question cars are better now. It's easily got a quarter of a million miles in it," Shipman said, calling it a "purely economic decision" to hold off on a new car.

Shipman, who lives near Boston, would like a new car but that won't happen "until we can turn this business around," he said.

The decision is more philosophical for Chicagoan Lisabeth Weiner says a new car isn't even on her radar screen. Weiner worries a little about the rust spots on her white 1992 Acura Legend, but after years of reliable service and "just 75,000 miles" on the odometer she sees no reason to buy a new vehicle.

"To me, there are two types of cars in the world, cars that go and cars that don't," she said. "As long as it keeps going, I don't see why I should change. Why would I take on the expense of a new car?"

Weiner, who runs a public-relations business, said a new car's only attraction would be its safety features because she has a 7-year-old daughter and a 16-year-old son who is learning to drive.

CNW Marketing Research, which studies consumer buying decisions, says Weiner is hardly alone. New vehicles have fallen behind home improvements and high-end appliances as big-ticket status symbols.

"Today, neighbors are just as likely to be impressed by ultra-upscale kitchen appliances as a new car in the driveway," CNW President Art Spinella noted in his July summary of the auto market.

GM market analyst Paul Ballew isn't buying it. He sees economic distress, such as the housing slump, as the reason car purchases are delayed. Ballew also predicts sales will perk up by next year.

"[New cars] are a purchase that can be deferred," Ballew said. "That's usually due to macro [economic] factors that affect consumers' buying cycles."

July's dismal sales amounted to 1.3 million vehicles for the industry. For the calendar year, sales are off 3 percent from 2006 and 8 percent from two years ago, when employee-discount pricing fueled purchases.

As has been typical, domestic manufacturers fared worse than imports. Their collective market share of less than 50 percent is in stark contrast to the days when GM alone commanded more than half the U.S. market.

Ford sales analyst George Pipas said slipping below 50 percent was "no more significant than 51 or 52 percent. This was at least 30 years in the making."

Earlier, Pipas shrugged off a suggestion that Ford will soon permanently lose second place to Toyota in the U.S. With calendar year sales of 1.55 million, Toyota is less than 10,000 vehicles behind. "We're way beyond that," Pipas said, saying Ford's focus is to "return our business to profitability."

Ford's U.S. sales are down 12 percent this year, but it reported a $750 million second quarter profit. GM's sales are off 9 percent, yet it made $891 million in the quarter. Analysts expect GM to be profitable for the year but Ford to lose money.



Post a Comment

<< Home