Big discounts helped keep U.S. auto sales sizzling in July. The Associated Press reported that General Motors, Ford Motor Co., Nissan and Chrysler Group all reported big gains as the major automakers reported July sales Friday (Aug.1).
Industry sales were expected to rise 5% to 1.4 million, according to J.D. Power and Associates. That would make it the best July for the industry since 2006.
Generous summer discounts helped boost sales, said Jesse Toprak, the chief analyst at the car shopping site Cars.com. Toprak said the average price buyers paid fell 4% in July, while incentives were up 8% — or $216 per vehicle — over last July.
Automakers typically use summer discounts to clear out their lots before vehicles from the new model year start arriving in the fall.
According to Toprak, incentives averaged $2,774 per vehicle, their highest level since August 2010. He said Ford, Hyundai, Kia, Toyota and Volkswagen boosted incentives the most.
Chrysler’s U.S. sales jumped 20% for the month on strong demand for the Ram pickup, while Ford’s were up 10% on big gains for the Escape and Explorer SUVs.
GM’s sales rose 9% on strong demand for its new large SUVs.
Nissan’s sales rose 11%. Sales of the electric Leaf increased 62% to 3,019, a record July for the car. The car went on sale in 2010.
Chrysler’s Ram Truck Brand operation has confirmed that a second Fiat-based van will be joining the Ram commercial-truck lineup, according to a news report posted by WardsAuto.com.
New CEO Reid Bigland told reporters at Chrysler’s Auburn Hills, Mich., headquarters that the new as-yet-unnamed van will be based on the Fiat Doblò Cargo van and will be launched here within 18 to 24 months, reported Wards.
The Doblo-based van will replace the outgoing Ram C/V Tradesman van, which is based on the Dodge Grand Caravan minivan.
The new, smaller commercial van will join the Fiat Ducato-based ProMaster full-size van in the 2014 Ram line. According to Ram, the Ducato was reconfigured for the North American market as the ProMaster. That van will begin production in the third quarter of this year at the Chrysler plant in Saltillo, Mexico.
Detroit’s carmakers saw strong June U.S. car sales with Chrysler Group LLC, a subsidiary of Italian Fiat SpA (Milan: F), reporting 20% year-over-year sales growth, General Motors Co. reporting 16% sales growth and Ford Motor Co. reporting more modest 7% sales gains.
The news sent automakers’ shares up, with GM’s up about 6%, with more modest gains for its rivals, the International Business Times reported.
Chrysler was the first major automaker to report June car sales Tuesday and posted its strongest June in five years with 144,811 vehicles sold. However, industry analysts expect overall U.S. auto sales to be more or less flat from May with a seasonally adjusted average selling rate, or SAAR, of between 13.6 million and 14 million for June. June sales for U.S. automakers were strong in June, though, in part due to insulation from macroeconomic uncertainty for the industry.
“The combination of new products, available credit, lower fuel prices and modest economic growth was a stronger influence on consumer behavior than economic and political uncertainty,” General Motors Vice President for U.S. sales and operations Kurt McNeil said Tuesday.
The auto industry as a whole isn’t expected to demonstrate the strong sales growth of the first five months due to seasonality in car sales, said Alec Gutierrez, senior market analyst for Kelley Blue Book. Chrysler projected a SAAR of 14.4 million units, well above analyst projections.
Chrysler sales gained 20% in June, marking the 27th month of year-over-year sales growth. The Chrysler, Jeep, Dodge, Ram Truck and FIAT brands all posted gains. Chrysler brand sales rose 63%t, the best June sales since 2008.
“June was another solid month for the Chrysler Group with U.S. sales up 20% and second-quarter sales increasing 24% compared with the same period in 2011,” President and CEO of Dodge Brand and head of U.S. sales Reid Bigland said.
Chrysler has been the only profitable division of Fiat in recent quarters. Strong sales from the American unit could bolster weak European sales for the Italian automaker.
Ford reported June sales rose 7% from the year due to higher sales of trucks and SUVs.
“June was a good month for Ford and a particularly strong month for vehicles like Escape, Fusion, Explorer and F-Series,” said Ken Czubay, Ford’s vice president of U.S. marketing, sales and service.
Ford sales are up 7% for the year so far with 1.14 million vehicles sold, including 207,759 sold in June. The bulk of June sales gains came from SUV sales. SUV sales rose 24.8% while truck sales gained 1.2%. Car sales growth was more modest at just 0.3%.
Sales of Ford’s flagship F-series trucks rose 10.9% with 55,025 sold, the best June sales in five years, indicative of increasing demand for Ford trucks. Car sales were weaker, though, with both the Fiesta and Focus posting losses. However, Fusion sales gained 17.4%.
Ford’s Lincoln brand actually posted a 2.5 percent gain with 7,544 units sold, indicating positive movement.
GM, the No. 1 automaker reported 15.5% year-over-year U.S. sales growth in June and the best sales month for the company since September 2008.
All four of GM’s brands, Chevrolet, GMC, Buick and Cadillac, reported double digit sales gains, with Cadillac leading the pack at 26.8%. Overall, GM sold 248,710 vehicles in June and projected a seasonally adjusted annual rate of sales of 14 million for June, in line with the high end of analyst expectations.
Toyota, Japan’s No. 1 company, said June U.S. sales rose 60.3% compared to the year before, the company announced Tuesday.
The exceptional growth in year-over-year sales likely reflects the company’s continued recovery from supply-chain, manufacturing and inventory disruptions caused by last year’s Japanese earthquake and Tsunami and floods in Thailand.
Chrysler and General Motors are the latest truck makers to add to the natural-gas fleet: Both are unveiling plans to manufacture pickup trucks that run on the alternative fuel at this week’s Work Truck Show in Indianapolis.
The Chicago Sun-Times reported that by the end of this year, General Motors will sell a Chevrolet Silverado and a GMC Sierra that will run on gasoline and natural gas, the company said Monday.
The “bi-fuel” vehicles will be built in Fort Wayne, Ind., and sent to GM’s Union City, Ind., plant to be retrofitted with compressed natural gas fuel tanks, GM said.
Chrysler is expected to announce Tuesday that a Ram truck to be built in Mexico will travel 255 miles on natural gas before automatically switching to an 8-gallon gas tank..
Ford Motor Co. has said it will expand the variety of kits it provides to convert an existing vehicle to run on natural gas to include the Ford 650 pickup later this year.
Honda has sold a natural gas-powered Civic for 14 years.
After its split from Daimler, Chrysler stopped selling the successful and popular Sprinter commercial van. Fiat, however, is coming to the rescue with the Ducato, its own commercial van currently on sale in Europe.
According to Automotive News, the Chrysler Group will soon sell a commercial van in North America based on the Fiat Ducato under the Ram brand. The Ducato shares its front-drive platform with the Peugeot Boxer, both of which are currently sold in Europe.
“It’s designed perfectly to try and deal with the market segment here in the United States, so we think it will grow,” said Sergio Marchionne, CEO of the Chrysler Group.
Marchionne was on hand at the 2012 Detroit Auto Show where he said his company would expand its plant in Saltillo, Mexico to build the Ram-branded Ducato in time for a 2013 sale date. No other details have been provided, but the Ducato should be offered in a number of configurations. The automaker will likely make minor cosmetic changes to give the Ram a more distinctive look for the North American market.
Once it arrives, it will do battle with a number of established commercial van offerings such as the upcoming Ford Transit and the Sprinter, which is now sold under the Mercedes-Benz banner. Chrysler currently sells a commercial version of the Dodge Grand Caravan called the Ram C/V, though it is smaller than the Ducato.
The Chrysler Group has already announced plans to bring over the Fiat Doblo, which is similar in size to the Ford Transit. Like the Ducato, the Doblo will be sold here as a Ram. No official word on when the Doblo will reach our shores.
Congress is working to keep U.S. auto suppliers in business.
U.S. Rep. Mark Souder, R-Ind., delivered that message to a handful of local suppliers Tuesday (May 12) at the Goshen (Ind.) Chamber of Commerce, but pointed out that it’s not going to be easy, according to The Goshen News.
“The complexity on how to address this is huge,” Souder said following the two-hour closed-door meeting.
Souder, whose district covers northeast Indiana, has been meeting with leaders of General Motors Corp. and Chrysler LLC to understand their challenges and discuss finances, unions and the supply chain, among other topics. Part of what initiated the talks was a recent announcement from GM that any dealership that sold fewer than 30 vehicles or failed to hit at least 50% of its quota would be terminated. Dealers would then have a deadline of Dec. 31, 2010, to liquidate remaining items.
The announcement is another leg kicked out from underneath the supply chain, much of which operates in northern Indiana. Souder worries just how many more hits the area can take.
“If we lose our big auto companies on top of the (most likely partial) recovery in RVs, we’re looking at a catastrophic, probably irrecoverable impact on our area similar to Studebaker in South Bend,” Souder said. “On top of what’s happening everywhere else in housing and RVs, we’ll never replace the jobs we’re losing.”
Despite the negative atmosphere, Souder said he believes 50% to 60% of GM’s dealers will survive, and that GM, after going through bankruptcy proceedings, will also survive. He also believes Ford will survive, but doesn’t know what will happen with Chrysler, which has filed bankruptcy and signed a partial ownership deal with Italian auto manufacturer Fiat SpA, which is being handled to some extent by the Italian government.
At the same time, he noted that American auto companies are competing with foreign companies that are being financially supported by their governments in ways the United States hasn’t yet seen.
“It’s not like this is going to bounce back when you have every government around the world funding your competition,” Souder said. “Those countries view them as integral and a much bigger part of their country than even autos are in our country, so they are going to do everything they can to keep them from folding.”
He said, for example, although some American auto parts suppliers will sell to Japanese companies, Japan restricts the amount of American parts used in their vehicles, even if they are being built in the United States. Again, he said increasing our competitiveness will not be simple.
“You can’t just whip up barriers or China will pull out of our market and collapse our economy,” Souder said.
One way Congress is working to prop up the American auto supply chain is by trying to figure out how to use Troubled Asset Relief Program (TARP) funds to make a difference to keep the companies from shutting down.
According to chamber president David Daugherty, reaction to Souder’s statements from local suppliers was relatively positive.
“Most of them said, ‘we’re geared for it, we’re OK, we’re going to make it,’ so that was the reassuring part,” Daugherty said.
He said that, to an extent, nothing will change with the basic business of running the companies, and placement will be key.
“It’s going to be different when General Motors comes out of whatever they go through,” Daugherty said. “It’s one where you’re going to have to make sure you’re there, you’re competing, you’ve got the product and that your suppliers are getting you what you need to stay in the game.”
Chrysler LLC filed for bankruptcy protection today (April 30) and will form an alliance with the Italian carmaker Fiat Group SpA in an effort to revive the nation’s ailing third-largest automaker, according to The Associated Press.
The Obama administration said it had long hoped to stave off bankruptcy, but it became clear that a holdout group of creditors wouldn’t budge on proposals to reduce Chrysler’s $6.9 billion in secured debt. Clearing those debts was a needed step for Chrysler to restructure by a government-imposed Thursday deadline.
“No one should be confused about what a bankruptcy process means,” President Barack Obama said in a midday announcement. “This is not a sign of weakness but rather one more step on a clearly chartered path to Chrysler’s revival.”
Chrysler filed for Chapter 11 bankruptcy protection in New York with the hopes of emerging in as little as 60 days under the new partnership with Fiat. The government, which has already poured $4 billion in loans into Chrysler, would provide up to $8 billion more to carry the company through bankruptcy, said senior administration officials speaking on condition of anonymity. The government will also help appoint a new board of directors.
The deals give Chrysler “a new lease on life,” Obama said.
“This is not a sign of weakness,” he said. “I have every confidence that Chrysler will emerge from this process stronger and more competitive.”
Under bankruptcy, Chrysler would still sell cars and the government would back its auto warranties. But Chrysler said Thursday that it will idle its plants during the legal proceedings. The company’s chief executive, Robert Nardelli, said he will leave when the bankruptcy is complete.
When that occurs, the Auburn Hills, Mich.-based automaker would end up owned by the United Auto Workers union, the U.S. government and Fiat. The Canadian and Ontario governments, which are also contributing financing, would have small stakes.
But Fiat, which the Obama administration hopes can jump start Chrysler with its fuel-efficient and lower-emission technology, could end up the majority stakeholder. Fiat would initially get 20%, a share that could rise to 35% if certain benchmarks are met. Fiat said Thursday it could get an additional 16% by 2016 if Chrysler’s U.S. government loans are fully repaid.
Obama said Chrysler Financial, the arm of the company that makes loans to buyers and to dealers to finance their inventories, will be merged into GMAC Financial Services, once General Motors Corp.’s finance arm. The new GMAC will get government support. Chrysler’s base of dealers would also be pared down.
The Treasury Department’s auto task force has been racing in the past week to clear the major hurdles that prevented Chrysler from coming up with a viable plan to survive the economic crisis ravaging nation’s automakers.
Along with the Fiat deal, the UAW ratified a cost-cutting pact Wednesday night.
Treasury reached a deal earlier this week with four banks that hold the majority of Chrysler’s debt in return for $2 billion in cash.
But the administration said about 40 hedge funds that hold roughly 30% of that debt also needed to sign on for the deal to go through. Those creditors said the proposal was unfair and they were holding out for a better deal.
“I don’t stand with them,” Obama said.
A person briefed on Wednesday night’s events said the Treasury Department and the four banks tried to persuade the hedge funds to take a sweetened deal of $2.25 billion in cash. But in the end, this person said most thought they could recover more if Chrysler went into bankruptcy and some of its assets were sold to satisfy creditors. This person asked not to be identified because details of the negotiations have not been made public.
On Thursday, a group of funds identifying themselves as 20 of Chrysler’s “non-TARP lenders” released a statement saying they had been sidelined during negotiations between lenders and the government. The group, which said it holds $1 billion in Chrysler debt, complained that the four banks were “obviously conflicted” because they had accepted money from the government’s Troubled Asset Relief Program while they had not gotten TARP money.
The group said its offer to the Treasury Department to reduce its claim to 40% was “flatly rejected or ignored.”
Fiat is getting its stake in Chrysler for giving the company access to its fuel-efficient technology, a move toward cleaner cars that the Obama administration thinks is critical to Chrysler’s future survival. The company has committed to building Fiat cars in Chrysler factories, to be sold as Chryslers.
Obama’s auto task force in March rejected Chrysler’s restructuring plan and gave it 30 days to make another effort, including a tie-up with Fiat.
Chrysler’s bankruptcy filing said it owes more than $10 million apiece to 20 of its unsecured creditors, many of whom are vendors and suppliers.
At the top of that list were: Ohio Module Manufacturing Co. ($70.3 million), BBDO Detroit Inc. ($58.1 million), Johnson Controls Inc. ($50.3 million), Continental Automotive ($47 million), Cummins Engine Co. ($43.9 million) and Germany-based Germersheim Spare Parts ($36.2 million).
While no one seems to know when the current economic recession will hit bottom and begin the slow bounce back, indications are that when it happens, it will be a vastly different landscape.
According to a report Wednesday (April 22) in Automotive News, Michael Robinet, vice president for global vehicle forecasts at CSM Worldwide, Detroit, Mich., said it will take three to four years for North American auto production to recover to pre-recession levels. And when it does, Detroit automakers will only be filling 45% of the total. As recently as 2000, the “Detroit 3” – General Motors Corp., Ford and Chrysler – produced more than 75% of all vehicles built in North America.
The “Asian 4,” Toyota, Honda, Nissan and Hyundai, are seen as likely beneficiaries of the change in production from traditional domestic OEMs.
Robinet’s comments were voiced during a meeting of the Detroit Regional Economic Partnership.
The executive also noted that the industry will downsize its offerings in order to meet federal fuel-economy requirements, with the strongest product segments forecast to be subcompacts, compacts and mid-sized vehicles.
“We are going to start driving more appropriately sized vehicles,” he said.
While much of Robinet’s statements were directed at the North American market, he also noted that the current recession is having a worldwide impact. According to Robinet, automakers built vehicles at an annualized rate of 74 million units in January 2008; in January 2009, that rate fell 42%, to 43 million units. The dramatic decline has led to an industry capacity utilization rate of approximately 60%, far below the 80% to 85% rate Robinet said was required for automakers to operate profitably.
Nearly one-quarter of the way through the 2009 year, North American production (U.S., Canada, Mexico) has fared even worse. Through April 18, North American car and truck production totaled 2,237,575 units; through April 19, 2008, that year-to-date figure was 4,345,178 vehicles. Total U.S. production is down by more than 54%, 1,401,424 versus 3,051,203 units.