Traverse City Record-Eagle

Business

December 4, 2012

Sandy boosts auto sales

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DETROIT (AP) — Superstorm Sandy gave an extra boost to U.S. auto sales, making November the best month for carmakers in nearly five years.

Toyota, Volkswagen and Chrysler were among the companies posting impressive increases for November, which is normally a lackluster month because of colder weather and holiday distractions. Only General Motors was left struggling to explain yet another month of weak growth.

Industry sales rose 15 percent from a year earlier to 1.1 million, according to AutoData. That was their fastest pace since January 2008. U.S. sales would reach 15.5 million this year if they stayed at November's rate, far higher than the 14.3 million rate in the first 10 months of this year.

Americans are more confident in the economy, a key driver of auto sales. Home values are rising, hiring is up and auto financing remains readily available. And besides just feeling better, people need to replace aging cars or vehicles damaged by Sandy.

"Everything is kind of moving along almost in concert now," says Jeff Schuster, senior vice president of forecasting for LMC Automotive, a Detroit-area industry consulting firm.

Sandy added 20,000 to 30,000 sales industry wide last month, mostly from people who planned to buy cars during the October storm but had to delay their purchases, Ford estimates.

People who need to replace storm-damaged vehicles are expected to drive sales for several more months. GM estimates that 50,000 to 100,000 vehicles will eventually need to be replaced.

Even so, carmakers warned that uncertainty over the "fiscal cliff" could undo some of the gains.

The term refers to sharp government spending cuts and tax increases scheduled to start Jan. 1 unless an agreement to cut the budget deficit is reached between Congress and the White House. The cuts and tax increases, if enacted, could push the U.S. economy back into a recession and could derail the industry's recovery.

Alec Gutierrez, a senior market analyst with Kelley Blue Book, said a household making $100,000 per year would pay $160 more per month if the payroll tax goes up 2 percent. That's about the same amount as a lease payment on a compact car. For that reason, Gutierrez suspects some buyers are waiting to see if an agreement is reached before investing in a new vehicle.

But for now, most Americans seem comfortable buying.

At Toyota, sales rose 17 percent in November, partly due to post-Sandy demand. Honda was up 39 percent thanks to strong sales of the new Accord sedan and clearance deals on the outgoing Civic, which was replaced by a new 2013 Civic at the end of the month. Volkswagen's sales rose 29 percent on the strength of the Passat sedan.

But at General Motors, sales rose just 3 percent.

GM's biggest brand, Chevrolet, reported flat sales over last year despite new products like the Spark minicar. Silverado pickup sales fell 10 percent.

GM's sales have been trailing the industry all year. They were up 4 percent through October, compared to the industry-wide increase of 14 percent.

Kurt McNeil, GM's U.S. sales chief, and other GM executives tried to explain the automaker's disappointing performance.

GM said its competitors resorted to higher-than-usual incentives last month to get rid of 2012 model-year trucks. GM, which had more 2013 trucks on its lots, was offering $500 less per truck than the industry average. GM has been trying to hold the line on costly incentives, which can hurt resale value and brand image.

"We want to be known for great products, not great incentives," McNeil said.

But some analysts think GM will be forced to offer more deals in December to clear out inventory.

At Ford, sales were up 6.5 percent on the strength of the F-Series pickup. Ford also saw strong sales of its new C-Max hybrid wagon and of the Ford Focus small car.

Asian brands also got a boost from some unusually big discounts, said Jesse Toprak, senior analyst for automotive pricing site TrueCar.com. TrueCar estimated that Hyundai and Kia, which were admonished by the U.S. government in late October for overstating gas mileage, increased incentive spending by nearly 30 percent. Nissan spending was up 45 percent to $4,273 per vehicle, by far the highest incentives in the industry.

Luxury cars saw their usual year-end surge as holiday commercials started crowding the airwaves. Porsche's sales rose 71 percent to 3,865, a record month for the automaker. Infiniti, Acura, BMW and Lexus all reported big gains.

Edmunds.com analyst Jessica Caldwell said luxury brands have historically targeted their customers at this time of year because of holiday bonuses. That's no longer a driving factor, she said, but it's still a good time of year for people to buy 2012 model-year luxury vehicles because dealers are trying to clear them out.

Gutierrez said about 70 percent of the vehicles on dealer lots are now 2013 models, so buyers should act quickly if they want a deal on a 2012 model.

If industry-wide sales end up at 15 million for the year, it would be a vast improvement over the 10.4 million during the recession in 2009. Sales would still fall short of the recent peak of around 17 million in 2005.

Other automakers reporting sales Monday:

-- Chrysler's sales were up 14 percent. Ram pickups were up 23 percent, while sales of the Fiat 500 minicar more than doubled.

-- Hyundai's sales rose 8 percent, led by the Sonata midsize car and the Elantra compact. TrueCar said Hyundai increased incentives by 30 percent it was admonished by the U.S. government in late October for overstating gas mileage.

-- Nissan's sales climbed 13 percent as sales of its new Pathfinder SUV more than tripled over last year.

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