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Car Sales Perk Up in July

But demand still short of expectations.

by on Aug.02, 2011

The new Nissan Versa sedan. Nissan was one of the rare few Japanese makers to report a July sales gain.

Sales by Honda and Toyota tumbled again during July even as overall U.S car sales began to regain some momentum last month, raising optimism about the outlook for the balance of the year.

Sales by the major Japanese automakers continued to be hurt by the inventory shortage created by the disruption of production which followed the earthquake that hit Japan in March. Toyota – which has the latest production base in the home market — saw sales drop 19.7% while Honda’s sales fell 25%

A few of the Japanese makers did manage to buck the trend, Nissan reporting a slight 2.7% increase. Subaru, one of the hottest brands in recent months, also reported a meager 2% increase despite an overall increase in the number of unit sales in July.

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Chrysler sales increased 20%, giving the long-struggling band its best July showing in five years, General Motors Co. reported an 8% gain in sales compared to July 2010 and Ford said its sales increased 9%.

“Despite all of the negative news headlines, auto sales have increased during July, which is a good sign for all of us,” said Ken Czubay, Ford vice president, U.S. Marketing, Sales and Service.  Added Ford sales analyst George Pipas, “The sales rate was better than expected.”

Notable for Ford was the fact that its once-strong Lincoln brand, a relative after-thought in the luxury market in recent years, posted a 40% jump for July.

“We are encouraged to see the stronger pace of auto sales, along with continued customer demand for our fuel-efficient cars, utilities and trucks,” Czubay said. “Fiesta, Focus and Fusion have put Ford back in
the car business,” Czubay said.

However, sales of the new Focus remained constrained by low inventory – recent industry reports pointing to a problem with equipment producing the newly updated model’s instrument panel.  Nonetheless, the smaller Fiesta and Focus remain the fastest-turning vehicles on the Ford showroom floor.

Chrysler Group LLC reported U.S. sales of 112,026, a 20% increase compared with sales in July 2010 and the best July sales since 2007.

“In a market that remains tougher than a cheap steak, we were able to produce our highest retail sales in more than three years,” said Reid Bigland, President and CEO – Dodge Brand and Head of U.S. Sales.  “I think that statistic is the ultimate testament to the progress we have made with our product in the areas of fuel economy, quality and design.”

Don Johnson, GM vice president, U.S. Sales Operations, said retail sales for GM’s brands rose 6% for the month compared to a year ago, and they also were 1% higher than June.

“Sales of our fuel-efficient cars like the Chevrolet Cruze and our crossovers remain strong, and we’re now also seeing the seasonal lift in full-size pickups that we expected,” Johnson said.

Cruze has nudged aside several traditionally strong Japanese models, including the Honda Civic, to become the nation’s best-selling passenger car in recent months.

Despite early fears, the shortages facing Japanese makers triggered by the March 11 disaster have had little impact on Detroit, European or Korean makers.  Nonetheless, the industry as a whole has faced significant headwinds in the past several months – ranging from raw material costs to the impact of a weak economy.

(As TheDetroitBureau.com reported this week, a new study finds high unemployment reducing U.S. car sales by more than a million units this year.  Click Here for the full story.) Nevertheless, the industry is poised to regain some of its lost momentum in the second half of the year, aided by higher supply and pent-up demand, Johnson believes.

“There are people who put off vehicle purchases because of uncertainty about fuel prices, vehicle availability and the economy,” he said, but, “As these conditions improve in the latter half of this year, many of these buyers will return to the market.”

Japanese executives also sounded more upbeat than in recent months. “We’re optimistic about the rest of the year,” said Randy Pflughaupt, Toyota Motor Sales vice president of sales administration.

“We look forward to improved inventory levels in the coming months as most of our North American facilities begin to return to full production in August,” said John Mendel, American Honda executive vice
president of sales.

Jeff Bracken, Toyota Division vice president, also emphasized the Japanese auto giant was prepared to defend its claim to having the best-selling car in America.

Saab North America reported an 18% decline in sales, following the recent turmoil at the company home base in Sweden.  The maker’s main assembly plant has been out of production since late March due to a boycott by suppliers demanding payment.

But Volkswagen of America, Inc. reported a 21.7% increase over prior year numbers.

“July was a strong month and signaled a good start for the second half of the year,” said Jonathan Browning, President and CEO, Volkswagen of America, Inc.  “For the seventh month in a row, we significantly outpaced the industry performance, showing strong baseline demand for our products,” Browning said.

Mercedes-Benz sales increased 16% and BMW sales were up 11%, while Porsche sales climbed 2%. Among the Korean automakers Kia posted a 42% increase in sales, while Hyundai’s sales increased 10%.

“Despite continued weakness in the economy and the ongoing concern over the debt ceiling, consumers continued to purchase vehicles packed with options in July,” said Jesse Toprak, VP of Industry Trends and Insights for TrueCar.com, an internet site devoted to monitoring automobile pricing, purchases and shopping trends.

“Tightened inventories, lower dealer discounting and manufacturer incentives, along with a more expensive product mix resulted in the highest transaction prices we have recorded in the industry.”

(Used car prices slide after months of steady increases – even though July demand hit “blockbuster proportions.  Click Here for that story.)

Toyota’s Profits Tumble By 99%

Hit hard by Japan’s March disaster, as well as weak U.S. dollar.

by on Aug.02, 2011

CEO Akio Toyoda says Toyota faces serious headwinds even after recovering from Japan's March disaster.

Toyota Motor Co. pointed its corporate finger at the March 11 Japanese earthquake and tsunami for the 99% decline in its earnings for the first-quarter of its latest fiscal year – but longer-term concerns about the strong yen pose problems that could extend well into the future, the automaker warned.

The maker raised a previously bleak earnings forecast for the full 2012 fiscal year, but the increase still fell below the general consensus of industry analysts who have been observing the maker’s ongoing recovery from the March disaster, which cost Toyota 599,000 units of last production for the April – June quarter.

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“In Japan and North America where the effects of the earthquake were particularly serious, vehicle sales declined substantially,” noted TMC Senior Managing Officer Takahiko Ijichi.

For the quarter ending June 30, Toyota’s net income plunged to just 1.1 billion yen, or $14 million, down from 190 billion yen, or $2.5 billion, a year earlier.  Sales and revenues fell by 30%, to 3.44 billion yen, or $44.5 million.

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Honda Earnings Tumble – But Mitsubishi Rides Out Quake With Rare Profit

Both makers anticipate earnings upturn over coming months.

by on Aug.01, 2011

Honda's earnings could rebound if new products like the next-gen CR-V catch on in the months ahead.

With some of its key models still in short supply in the wake of the March 11 earthquake and tsunami that devastated Northeast Japan, few analysts were surprised when Honda Motor Co. reported a 90% plunge in profits for the latest quarter.

The real shock came from long-troubled Mitsubishi Motors, which rode out the impact of parts and product shortages to post a rare profit for the first quarter of the Japanese fiscal year, which began on April 1, just weeks after the natural disaster struck.

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Both companies – like most of the Japanese industry — are betting that as shortages are made up, earnings will steadily improve in the months ahead.  Honda, in fact, raised its full-year profit forecast, underscoring its confidence in a strong recovery.  But the maker has several critical challenges.  It has to get the new 2012 Civic into full production mode.  Its spring launch unfortunately coincided with the Japanese disaster and U.S. officials warn the new small car may not reach normal production levels until autumn.  Meanwhile, Honda has to hope there will be no more setbacks as it prepares to launch the next generation of its compact CR-V crossover.

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June Sales Rebound – For Some

Koreans, domestics make strong gains, but Toyota, Honda hammered by shortages.

by on Jul.01, 2011

The Chevrolet Cruze surged past rivals like the Camry and Corolla to become America's best-selling passenger car in June.

It was a good month – for some – but while domestic and Korean automakers saw sales rebound after May’s unexpected plunge, two of Japan’s biggest makers continued to face problems due to product shortages.

With gas prices sliding after their mid-spring peak, June saw a notable upturn in demand for pickups, though small cars maintained strong sales, as well, according to industry data released on Friday.   But that was small consolation for Toyota and Honda, which are minor players in the pickup segment and who ran into serious shortages of small, fuel-efficient passenger cars like the all-new Honda Civic.

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That gave General Motors the chance to sprint past its Asian rivals, the Detroit maker’s Chevrolet Cruze surging past both the Civic and Toyota Camry to become the best-selling passenger car in the U.S.

Overall, U.S. sales for June climbed by 7% year-over-year, to 1.05 million.  That was short of the double-digit gain industry analysts had been forecasting but still an improvement over May, when the industry posted its first slide this year.

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June Car Sales Likely to Show Slight Rebound

But Toyota, Honda still likely to be down sharply.

by on Jun.28, 2011

Toyota sales will likely be off sharply for June.

The U.S. auto industry should have a reason to celebrate over the upcoming Independence Day holiday; initial data suggest that increased industry discounting set off fireworks for consumers, sending them back to showrooms after May’s unexpected downturn.

But the trendline remains soft compared to the strong market of early 2011, and at least one study of consumer “intensity” suggests that the rebound may not last long, sales potentially slipping again in the months ahead.

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June’s apparent upturn suggests that consumers are opening their pocketbooks again now that fuel prices have retreated a bit from an early spring surge.  Meanwhile, manufacturers like Toyota have consciously bought momentum by ramping up their incentives.  Makers had consciously trimmed back their giveaways over the spring – in large part responding to product shortages created by the March 11 earthquake and tsunami that devastated Japan.

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Japanese Makers Hiring Thousands to Make up for Lost Production

Toyota, Honda alone will add up to 5,000 temporary jobs.

by on Jun.22, 2011

Toyota is struggling to make up production of the Prius lost due to Japan's March 11 earthquake and tsunami.

With operations at most of Japan’s automotive supplier and assembly plants starting to return to normal, manufacturers are putting out the Help Wanted signs as they race to make up for lost production.

Toyota and Honda alone expect to add up to 5,000 temporary workers in a bid to boost their output during the second half.  Other makers, including Nissan, plan to hire new workers, as well.

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Toyota now hopes that it can add an extra 350,000 vehicles to its assembly schedule during the second half of the fiscal year ending next March, said Senior Managing Director Takahiko Ijichi, which would reduce its overall production losses to about 450,000 cars, trucks and crossovers.

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Toyota Reports Dealers Down to 4 days of Prius Inventory

Though overall hybrid sales sliding, Toyota officials hope for strong launch of new Prius v.

by on Jun.21, 2011

The debut of the Prius v has been pushed back about two months because of the Japanese earthquake.

While its factories are rapidly getting back up to full speed following the devastating March earthquake in Japan, Toyota dealers are struggling to meet demand for the popular Prius with barely a “three to four-day supply” of the world’s best-selling hybrid model, a senior official said.

 

By comparison, makers consider a 50 to 60-day supply to be normal for most products.  The shortfall likely resulted in a 30 to 40% shortfall in sales of the Prius during May, said Toyota’s hybrid marketing manager Ed LaRoque.

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The crisis, which all but shut down Toyota production the first month after the March disaster—and continues to leave its plants running below capacity — has also forced the maker to delay the launch of its new Prius v, the first in a “family” of hybrids to share the same brand identity as the original Toyota model.  According to La Roque, the debut of the v, a larger, wagon-like take on the familiar hybrid sedan, will be “a few months behind,” and probably won’t reach U.S. showrooms until around October. The maker is meanwhile hoping to start rebuilding supplies of the original Prius over the next several months.

 

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Toyota’s U.S. Plants Down for a Week

Production of new Honda Civic won’t recover until “sometime” in autumn.

by on May.27, 2011

The 2012 Honda Civic will remain in short supply until at least the coming autumn.

Toyota’s entire U.S. production network will be sitting idle next week, the maker deciding to stretch out the normal Memorial Day holiday break because of ongoing shortages of Japanese-made parts.

Honda, meanwhile, says that while its global factory network appears to be recovering faster than it first anticipated it will be facing more problems getting production up to speed for the new 2012 Civic model, which is likely not to reach normal volumes until “sometime” in autumn.

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A new report underscores the magnitude of the crisis touched off by Japan’s March 11 earthquake and tsunami.  In Japan, Toyota production was off by 74.5% for all of April, while its global production declined 48%.

The disaster had only marginal impact on automotive assembly plants but 100s of supplier facilities were damaged or destroyed.  Others have been struggling under the rolling blackouts implemented after the quake touched off a triple meltdown at the Fukushima nuclear plant.

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McBlog: Toyota and the Trials of Job

“All the dealing is over. Everything’s over.”

by on May.13, 2011

Held captive by disbelief we watched on TV that improbable tsunami, dark with disturbed sand, textured with the detritus of people’s lives ranging from children’s plastic sandals to grown-ups’ cars. How could this be? An uncontrollable King Kong nightmare flinging recognizable everyday things across a mundane landscape.

Our brains struggled to wrench some sense from the sight of seaside warehouses and absurdly colored plastic tubs, equally freed of normality, floating off together in a frothing soup in which cars bobbed like Halloween apples. Cars! And inexorably the invading wave rolled ever higher, up concrete stairs step by step where observers certain of their safe perch, were suddenly faced by a frothing mastiff broken free of its chain.

Disbelief. Theirs and ours. How often did we go back to our computers to view it again, stilled stunned.

But did we have any idea how it would disturb the way cars are bought and sold in our own neighborhoods?

The tsunami has slunk back to sea but it has not ended. It is now sweeping a ghostly wave, delayed but no less dismaying, across the lives of those who buy and sell cars in the rest of the world. Dealers in Japanese cars particularly are like those people on the cement stairway, incredulous at the inching reach of the murderous wave and the destructive quake that set it in motion.

It’s simple. People who make their living selling cars cannot make a living without cars to sell. And one by one Japanese car makers have announced delays and reduced production in one after another models. More recently they are telling dealers to expect some 10-20% of the cars they usually wheel off the transporters.

My friend (call him Fred Vang because that’s his name) buys cars for clients who prefer to avoid the discomforts of the dealing ritual or the esoterica of contracts. He told me of a distraught phone call from a simpatico commercial manager at a Toyota dealership (you can call him Al because that’s not his name). Al had provided Fred’s clients the past year with 25 to 30 satisfying deals on cars that pleased them right down to the garage floor. That’s Fred’s purpose in life as he sees it – matching car to buyer in an all-around smile fest. Al has aided that quest for 15 years.

But Al told Fred: “All the dealing is over. Everything’s over.” The sheet listing cars eligible for incentive support was chock full one day, the next day all but blank. Two cars. “Where we used to get 300 cars we will now get 30,” Al told Fred. The two have had a great working relationship just as Fred has with others and a range of dealerships across the country. They have built trust and familiarity. No games to play. No time wasted. Fred could tell Al what a client was hoping for and Al with phone and computer would search the country. Success might depend on some swapping of cars among two or more other dealers – like kids with steelies and aggies at the corner lot. (Or do kids swap marbles anymore?)

A RAV4 V6 with all-wheel drive in a beachy sand color the client liked had just been delivered to a woman in Georgia. Big deal? Yes, because it was likely the only RAV4 in the whole country that color with the other stuff on it the way she wanted. Al had tracked it down, the deal was satisfying and the RAV4 now lives in Atlanta. The last deal of its kind before the tsunami arrived at the showroom door where Al plies his trade. “Tell her how lucky she is,” a dejected Al had said.

At first, shortly after the wave receded, the first far-reaching effect felt in the car world seemed almost amusing. The earth shook under the sea near a distant shore and the result was a car shopper in Kansas couldn’t get his Ford Explorer in the Tuxedo Black he wanted. A few shades of red and some blacks were simply no longer a choice. A small company in the devastated area, the lone source of a component that added a sparkle and depth to those particular paints had been put out of commission.

Globalspeak anyone? Butterfly wings in the forest indeed.

Similar breaks in tangled webs of interdependence followed. Parts that fit in the palm of a hand were made by suppliers. Even suppliers to suppliers. The small plants were in critical areas. And thus the parts they were responsible for were not in time for just-in-time. Damage at the source meant disruption at the line. A tooth in the cog went missing. The assembly process looked like a first grader’s smile.

Shutting down was the only choice until the roads were reconstructed, small factories were repaired and the gaps were filled. By mid-May Tuxedo Black was again available, but some observers said six months was a more likely time span to see production fully recovered from the quake/wave damage.

Al had said there could be no more distant Fred clients relying on emails, phone calls and FedEx. Now anyone looking to buy one of the rare cars must come in, close the door, sit in an office and be fixed with salesman smiles and finance officer frowns. And never mind option boxes – the extras were-pre-selected. Chromed wheels added with the cars barely off the transporter. All of those “rust and dust” specials as the vernacular has it. ADMs, the dealer-added extras, could boost the car’s drive-away cost by $2000 to $6000.

It’s survivor time.

With the dealer getting fewer cars each one must earn a greater share. A dealership that a few weeks before was making it on volume — waving product out the door ASAP with certainty more would be rolling in to keep black ink on the books – had to change operating procedure instantly. Now it would be the gross profit on each unit that mattered. Slow down. Make each one count: Not: “Would you like fries with that?” Instead: “Fries come with that.” If someone in the buyer’s seat says: “But I don’t want fries,” the sales manager opens the office door and calls out “Next”.

The drastic drop in product supply has not shown up equally in all markets. Fred said: “I think it started on the West Coast into the Rockies and has now jumped East. The Midwest may be slower to get it. But it will be world wide.”

Al called Fred again a few days after his first distressed call. An enlightened dealership owner had realized as bad as it was now the transporters would one day again roll freely and they could not find the bridges burned. Al told Fred: “He came in to tell me that you and I have worked together for a long time. We should continue that despite the shortage.”

But everyone else gets chrome wheels.

Fred felt compassion for Al’s plight, knocked off his feet by a wave that had long taken its odd flotsam back to sea. How many others like Al were there like him in Japanese dealerships? What a wrenching change of circumstances for them all.

He also felt a tinge of guilt. He could switch his custom to less affected brands. To American makers, to Japanese cars assembled in the US. Supply depended on models. A Subaru dealer he works with had told him that his supply for incentives had dropped from 250 to 21 cars. Japanese-built Imprezas and vehicles built on that platform – WRX and Forester – were already ranging from hard to find to impossible. Gone for sure are those models with manual transmissions. Easier to come by, for now at least, are the Subarus assembled in the US. Fred said the Legacy could now be had for less than an Impreza.

American cars were back on their financial feet again. And rising in the J.D. Powers approval ranks as well. The reports Fred prepares for his clients to help them in their selections were increasingly favorable to US cars. The American 3 should be able to plant a firmer foot in the market place with their competition crippled by circumstances.

And Korean cars most surely would benefit. Even pre-tsunami they had their dukes up ready to battle the Japanese industry. Now, composed of Korean-made parts, their supply was unaffected. The tsunami meant little to the manufacture of Kia and Hyundai. Not that American shoppers knew that. A report stated that visitors to Korean dealerships, as well as Japanese dealerships, had dropped off post-tsunami. Geography-illiterate Americans simply lumped Japan and Korea together. (And then there were those usual mind-numbing claims in the blogosphere that all cars coming from Asia would be radioactive anyhow. You’ll recall that the wave had killed a nuclear power plant in its sortie ashore. But whoo boy.)

Yes, Fred’s clients had good choices. “Detroit” cars, the Korean cars, the US-built cars of the Japanese companies. And then there was all of Europe, wasn’t there? In Fred’s own garage sat an appreciated VW Tiguan. The Tiguan was a good alternative to the RAV4, except the RAV4 had been beating it all hollow on the pricing front of late. Remember, Toyota’s first punch to the gut, long before the earth shook, was a redux of unintended acceleration. Ill-placed floor mats. Whatever. Some claimed ill-designed electronics. But an official investigation had cleared the electronics of fault. Toyota had been all but wrapping RAV4s in Christmas paper as its recovery from that first punch began. Excellent deals at least kept buyers in Toyotas through all its bad press. Gradually those deals tapered toward normality as recovery progressed.

Then came the second punch. That death wave. Harder on Toyota even than on Honda, Nissan, Subaru and Mazda because Toyota still produces more of its cars in its home country that it does abroad, many more than the other Japanese carmakers. (Nissan was reporting increased profits as May deepened.)

Maybe a two-liter “Trials of Job” would be a good next model for Toyota. (Preferably with a diesel.)

Though Fred had taken advantage of the RAV4’s positive marketing, sending lot of them across the country to a pleased clientele, he had prepared for a shrinking supply. The Tiguan is it will be. Except. Guess what he discovered about the safely-German Tiguan? Its transmission is made in Japan !

Is that a problem? It hasn’t seemed to be so far. But the world juddered a bit and shrank a tad more. And the tsunami dampened some more boot soles.

Want to read even more McBlog’s? Check out our columnist’s latest, greatest — and plenty of classic — work on DeniseMcCluggage.com.

Small Cars Drive Big Sales Gains in April

But Japanese makers begin feeling pinch of shortages.

by on May.03, 2011

Small cars, like the Hyundai Elantra, gained significant ground in April.

It was a big month for the auto industry, though the emphasis was on small cars.

General Motors, Ford Motor Co. along with Hyundai/Kia all posted substantial sales gains during April, Audi meanwhile reporting its best April ever, even as industry giant Toyota continued to stumble.

General Motors sales increased 27% in April, while Ford Motor Co. reported a 16% increase and Chrysler Group sales climbed 22%.  Hyundai reported a whopping 40% sales gain as it continued to woo buyers from other big Asian brands – pushing its market share to a solid 5.7% for the month, triple what it held less than five years ago.

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All three domestic carmakers credited new models for their strong sales last month, primarily small cars like the new Chevrolet Cruze, which gained 180% over the old Chevy Cobalt.  But there was still some strength left in large, luxury and muscle cars, like the Ford Mustang, which came on strong despite the run-up in fuel prices last month.

The improving car market is seen as a sign of an increasing healthy U.S. economy, though observers fret that if fuel prices get too high buyers might pull back in the months to come.  That might also happen, according to analysts, if makers pull back even more on incentives.  Overall, givebacks declined by about 4% in April, according to TrueCar.com, with some makers – notably Honda and Toyota – reducing their incentives by 17% or more.

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