January 2006 Was Good For Most Auto Makers in USA

DETROIT February 1, 2006; Poornima Gupta writing for Reuters reported that Detroit's Big Three automakers on Wednesday reported surprising increases in January U.S. vehicle sales, breaking losing streaks that began in the fall of last year as their aggressive discounting lost steam.

Japan's Toyota Motor Corp. and Honda Motor Co. Ltd., meanwhile, posted double-digit sales gains and seized more market share from their U.S. rivals.

Both General Motors Corp. and Ford Motor Co. cautioned that their outsize monthly gains came from a one-off surge in fleet sales, while their showroom sales actually declined in the traditionally slow month.

Sales to rental-car companies and other large-scale purchasers such as government agencies are generally less profitable than sales to individual buyers.

Strong fleet sales from U.S. automakers boosted the overall industry sales rate for January, Dave Healy, analyst with Burnham Securities, said.

Industrywide sales rose 7.6 percent to 1.14 million cars and trucks in January, according to industry tracking firm Autodata. Sales rose to a seasonally adjusted annual rate of 17.6 million units, far higher than analysts had expected, making the month the strongest January in recent years.

"It is due entirely to the Big Three's unusual level of sales to daily rental fleets," Healy said.

Even so, the stronger sales tallies were welcome relief for both GM and Ford, which are struggling to turn around their unprofitable North American vehicle operations.

The two largest U.S. automakers, hit by issues ranging from changing consumer tastes to rising costs for raw materials, have announced plant closings and layoffs.

GM, which last week reported a quarterly loss of $4.8 billion, said U.S. sales rose 6 percent in January, powered by a 30 percent jump in fleet sales.

"I would describe the month as pretty good, solid ... and where we expected it to be," said Paul Ballew, GM's executive director of market and industry analysis.

Ford's sales rose 2.7 percent, while sales for the Chrysler side of DaimlerChrysler AG were up 5 percent in January.

Nissan Motor Co. Ltd., however, saw U.S. sales dip 1 percent, its fourth straight month of decline.

Asian brands won a 37.5 percent share of the U.S. market last year, a 1.2 percentage point increase compared with the same period a year ago. U.S. automakers, on the other hand, collectively lost 1.6 points of share at 55.7 percent, according to Autodata.

Toyota beat Chrysler in January with a U.S. market share of 14.1 percent. Chrysler's share for January was 13.6 percent, Autodata said.

MORE FLEET SALES

GM said its retail sales were down 7 percent. Ballew said GM was targeting a 10 percent decline in sales to rental companies over the course of 2006, calling the January tally of 85,000 rental sales "a one-month aberration."

One important pocket of strength for GM in January was its new Chevy Tahoe SUV, part of the automaker's new GMT-900 series. GM sold more than 3,000 of the new vehicles, exceeding the automaker's expectations, Ballew said.

GM is banking on a series of redesigned SUVs and pick-up trucks, many of which have yet to be launched, to stem its sales slide.

Cross-town rival Ford said its fleet sales rose 21 percent.

Ford's new mid-size sedans -- the Ford Fusion, Mercury Milan, and Lincoln Zephyr -- continued to gain momentum.

The sales results for the new mid-size sedans translated to an annual sales rate of 220,000 units, well above Ford's original estimate of 190,000, the company's chief sales analyst George Pipas said. "I think these cars have yet to reach their full potential even at (that) level," Pipas said.

Overall, Ford's car sales increased 18 percent.

In keeping with a continuing trend, sales of Ford's large Expedition SUV declined 30 percent, while its mid-size Explorer was down nearly 23 percent.

Both GM and Ford have relied on mid- and full-sized SUVs as profit engines since the late 1990s. But those vehicles, especially from the aging lineups offered by GM and Ford, have become less attractive as gas prices hover near record highs.

U.S. automakers track economic indicators, including job creation and income growth closely in forecasting sales and production. Their results are watched in turn as an indicator of current economic performance.

The sales declines for the traditional Big Three corresponded roughly to the slower growth in the fourth-quarter posted by the U.S. economy. Gross domestic product slowed to just 1.1 percent annual growth in the fourth quarter, little more than a third of the third quarters 4.1 percent growth.

Also contributing the the reporting of this story was Jui Chakravorty and Kevin Krolicki writing for Reuters