U.S. auto market picks up speed in November

By Los Angeles Times
Posted Dec. 1, 2010 at 11:37 a.m.

Though still far from robust, the U.S. auto market continued its slow recovery in November as consumers headed for showrooms, enticed by heavy month-end advertising.

General Motors Co. the first of the major automakers to report Wednesday, said that November sales rose 21% from a year earlier, to 168,704 vehicles, after factoring out the Pontiac, Hummer, Saturn and Saab brands it closed or sold as part of its bankruptcy reorganization last year.

Through the first 10 months of this year — prior to the reports of November sales — the industry has been averaging about an 11% gain.

All four of GM’s remaining brands — Buick, Cadillac, Chevrolet and GMC — posted double-digit gains from a year ago.

Last November, GM sold almost 12,000 of its discontinued vehicles. November and December are the last months when the company had a high sales volume of the scuttled brands. Including those brands, GM sales were still up 11% over a year ago.

Ford Motor Co. said its sales rose 24% in November, to 147,338, after factoring out Volvo, which Ford sold earlier this year.

Chrysler Group said its sales rose 17%, to 74,152 autos.

American Honda Motor Co. said its sales rose 21%, to 89,617. Nissan North America Inc. said its sales rose 27%, to 71,366 vehicles.

“We’re seeing some stability and consistency in the marketplace for the first time since the economic downturn,” said Jessica Caldwell, an Edmunds.com analyst. “The automakers have realized that they can achieve profitability at this level of sales, and they seem to be settling into that reality.”

By the time all of the industry reports sales numbers, analysts believe that the annual selling pace may have topped 12 million for the second consecutive month, well ahead of the roughly 11.4-million pace posted by the industry so far this year.

“The consumer is crawling back, particularly in the more affluent and higher-quality credit segments, which should provide upside to our 2011 outlook,” Brian Johnson, an analyst with Barclays Capital, wrote in a recent report to investors.

Johnson said the industry continues to look good because of the low sales rate of a year ago, but that the health of the recovery will become more apparent when December numbers are in. The market started to turn up in December 2009, and will provide a harder measure for December sales this year.

Nonetheless, there are some signs that the domestic auto industry is gathering steam, he said. The average transaction prices have “steadily increased over the past few months, reflecting a newfound discipline” of managers at the Detroit automakers, he said.

They also held inventory in check and have gotten a boost from tough foreign currency exchange rates faced by their large Japanese competitors, he said.

The only major automaker to post a decline was Toyota Motor Corp., which has suffered a series of embarrassing recalls over the last year for problems with sticky gas pedals, brakes and electronics. Toyota said November sales fell 3%, to 133,700 vehicles, and the company has seen its market share fall this year.

“Toyota continues to struggle, being the only major manufacturer to report a year-over-year decline. Without new product to compete with and stripped of its bulletproof quality reputation, Toyota is forced to sell on the deal. This lack of profitability is a growing concern for dealers,” Caldwell said.

GM has seen several positive signs that the industry will continue its slow and steady recovery, said Jim Bunnell, a general manager in GM’s U.S. sales operations: Consumer confidence is starting to rise, and that was reflected in the positive start to the Christmas retail season.
Additionally, “used vehicle prices are at a new high and, as in past recoveries, that has always preceded an expansion in new-car sales,” he said.

Automakers also believe that there is growing demand from people who have put off purchasing a new vehicle for economic reasons and because cars are lasting longer. At some point, the automakers say, those people are going to move back into the market.

R. L. Polk & Co , the automotive information company, estimates that consumers are now holding on to vehicles they purchased new for nearly 64 months, up 4.5 months from a year ago. The data were collected in the second quarter on this year. The length of ownership has increased almost a year since the first quarter of 2008.

Caldwell said the industry was helped by a flurry of holiday advertising over the last week.

“If you watched TV over the holiday weekend, you saw a lot of deal messages,” she said.

Reflecting those deals, incentives rose slightly in November.
Auto price information company Truecar.com estimated that the average incentive for light vehicles was $2,712 in November 2010, up $12 (0.4%) from November 2009 and up $162 (6.4%) from October 2010.

“Even though incentives appear to be slightly higher this year, automakers are becoming smarter by focusing on low APR and special lease programs — strategies with relatively low costs due to near-zero interest rates and much improved residual values,” said Jesse Toprak, an analyst with Truecar.com.


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