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Shortest Month Brings Strong Sales

Despite storms, consumers surge back to showrooms.

by on Feb.28, 2011

"Nobody's buying," said Ford marketing czar Jim Farley, during the blizzards of early February.

It may have been frigid cold in much of the country, but things were only heating up inside the nation’s new car showrooms, this month.  Despite blizzards that led to a slow start, car sales for February will wind up well into the plus column, according to a preliminary report by J.D. Power and Associates.

Using data from dealers across the U.S., the research firm estimates sales will come in about 17.3% above year-ago levels – and 11.7% above January sales.

That’s a significant turnaround in just a matter of weeks.  Speaking to at the Chicago Auto Show, earlier in February, Ford’s global marketing chief Jim Farley lamented, “Nobody’s buying.”

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It didn’t help that much of the country was being hammered by frigid temperatures and a series of winter storms, but the Ford executive also worried that consumers were waiting for a new round of hefty incentives before signing on the dotted line.

Surprisingly, industry analysts suggest that the feared price war has so far failed to materialize – with a few exceptions.  General Motors ramped up its average givebacks to more than $3,500 a vehicle, according to various industry sources.  But the industry, as a whole, actually dropped those rebates and other deals by $127 a vehicle year-over-year, and by $31 compared to January.  The analysis site, Edmunds, estimated every new vehicle sold in February carried an average $2,530 in givebacks.

For the month, the industry is expected to report combined sales of 913,000 cars, trucks and crossover, according to J.D. Power.  That figure includes daily rental and other fleet business.  Makers have been trying to shift away from those fleets, which often generate little to no profits.

While the month began slowly, especially in the Midwest and Northeast, due to storms, “the market rebounded quickly in the days that followed, leading to a slightly stronger selling rate than in January,” said Jeff Schuster, a senior research analyst at J.D. Power.

If Power’s numbers hold true when the official sales data are released this week that would work out to an annualized sales rate of 12.4 million, significantly ahead of 2011 and a sign that the rest of the year could exceed generally cautious industry forecasts.

The preliminary February reports show all of the Detroit makers posting gains, but still failing to keep up with their import rivals – which would mean a dip in combined market share to just 46.2%.

Toyota is also expected to show a decline in share, to 13.7%, though the maker’s sales will be up by for the month.

The big question is whether Toyota is finally overcoming its image problems stemming from the so-called unintended acceleration problem that began making headlines with the big recall of October 2009.  Toyota had hoped to put its problems behind it when federal regulators earlier this month ruled that there were no unexplained gremlins plaguing Toyota electronic engine controllers – a claim made by many of the maker’s critics.

But last week, the troubled maker “snatched defeat from the jaws of victory,” according to analyst Dan Gorrell, of AutoStratagem, by announcing a new recall, related to unintended acceleration, and involving 2.1 million vehicles.  (Click Here for the full story.)

Among the likely winners for February are Honda, Nissan and Hyundai, all expected to post double-digit sales gains – and increases in market share.

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