Winners and Losers From January's U.S. Auto Sales Report

The important figures from January's U.S. auto sales report: total vehicle sales down 4.7%, daily selling rate was down 8.5%, inventories relatively flat (from year ago). This possibly suggests inventories climbed at foreign branded dealer lots.

My quick take: Retail sales (for the most part held in ok), but the impact of reduced fleet (particularly out of GM and Ford) dragged on the "top line" a bit more than I think people were initially expecting.

It also seemed like the foreign automakers and Chrysler were more aggressive with pricing than GM or Ford. At least GM was pretty public that they "dialed back" incentives. While Chrysler emphasized incentive packages of low rate financing and $5k back to help their dealers. They are also expanding an instant value coupon to a number of vehicles that seemed to "resonate well" in January.

But I'm getting ahead of myself. Here are the important figures to take away from the January U.S. vehicle sales results reported by the major automakers yesterday:

• Sales down 4.7% (absolute). Based on Ward's compilation, the total number of U.S. light vehicles sold in January of 2007 were ~1.1 million units, nearly 54,000 units, or 4.7% fewer than the prior year period.

• Sales down 8.5% (selling days). Officially, there were 2 more "selling days" in the month (26 versus 24 last year). I'm not a big fan of daily selling rate figures, but on a "selling day to selling day" comparison, sales were down 8.5% from last January.

• Inventories likely unchanged. Based on these preliminary sales figures, I estimate dealer inventories ended the month at 3.6 million units (my new projections are on the website). This is relatively unchanged from last year, and a bit disappointing considering dealer inventories were down more than 3% (year over year) in December and roughly 2% (on an unweighted basis) for all of 4Q06.

• Possible inventory increases at foreign branded dealerships. Granted, the above inventory calculations are only my projections. It will be a few weeks before AutoNews reports actual dealer inventories. But it sure looks like the favorable dealer inventory trends (observed in the fourth quarter) stagnated (or even reversed slightly) in January. And perhaps what is the most interesting, is that GM had flat inventories, while DaimlerChrysler and Ford were down (year over year). So if my calculations are correct, and the industry did have relatively flat inventories, the increases actually happened on foreign branded dealer lots.

GM: Fleet down, product mix favorable, inventories unchanged

• Sales down 16.5% (absolute) to 244,717. Fleet was down 30% (on an absolute basis) and retail sales were down 8% (on an absolute basis). Fleet represented 32% of total volumes in January 2007 versus 39% in January 2006.

• Sales down 19.9% (selling days). Fleet was down 33% (daily selling rate), retail was down 11% (daily selling rate).

• Inventories 1.07 million, flat with January 2006. Management said they plan to build inventories a bit in 2Q, but still target 1 million by year end. I think the dealers are pushing back as the company took another 40,000 units out of their production plan for 1Q07.

• Important quotes from the call: "not a great month (for retail), but no sign we are seeing further deterioration." "Product mix was favorable." "Industry always noisy in January." "Retail pace was 2.7 million (annualized) for the month below the company's target of 3 million." "Industry was up $600 per unit versus December while GM was down $500 per unit from December, so probably dialed back incentives."

Thoughts about the future: Management thinks the industry environment will be better in the second half, and by 2008/2009 it should get back to "more normal levels." Because the industry has experienced a couple exogenous shocks (housing and higher gas prices).

Ford Motor Company: fleet and inventory down

• Sales down 20% (absolute) to 161,246. Fleet was down 42% (on an absolute basis) and retail sales were down 5% (on an absolute basis). Fleet represented 29% of total volumes in January 2007 versus 38% in January 2006. Also, last year 60% of fleet was to "daily rent" with 40% going to commercial and government, whereas this year 36% of fleet went to daily rent, while 60% of the fleet volumes were to the government and commercial entities. So not only did they improve their retail/fleet mix, but they improved the mix of their fleet units toward the more profitable commercial and government sales.

• Sales down 23.2% (selling days).

• Inventories 591,000, down 23% from January 2006. Management said they think inventories are in very good shape.

• Important quotes from the call: Regarding inventories: "Don't want to have water torture where it takes years to bring down inventories. So as painful as it was, and you saw it in our 4Q income statement, our strategy this summer was to get this (inventory glut) behind us." Also, "January is the most difficult month of the year to predict and extrapolate the data because it is the weakest month of the year."

Thoughts about the future: George Pipas (Ford's head of sales analysis) indicated that retail unit volumes were likely to stabilize (be "more consistent") in the second half, but "I wouldn't rule out some retail increases in the first half" he said.

DaimlerChrysler: sales up 0.1%, "dealer relations are a huge priority"

• Sales up 0.1% (absolute) to 156,308. Retail up slightly (single digit), fleet down slightly.

• Sales down 3.5% (on a selling days basis).

• Inventories 488,410, down 11% from January 2006. About 18% of the company's inventories are model year 2006, 82% are 2007 model year vehicles.

• Important quotes from the call: I think they had to mention dealer relations (and the importance of) 10 or 15 times (but I didn't take a formal count). Specifically they said: "dealer relations are a huge priority. We had a meeting this month with the dealer council. Squared off a lot of things to make sure our strategies are aligned."

Thoughts about the future: Management said they are in the midst of "a very aggressive new vehicle launch." They have entered a lot of new segments and expect "incremental share." The goal is to "maximize new vehicles at the right price, meaning that customers get value, and we make money and so can dealers."

Foreign brands gain share

In total, based on the results Ward's compiled, the "Big 3" sold 51.8% of all new units in January 2007, down 530 basis points (5.3 "percentage" points) from the 57% share (of all new vehicle sales) they held in January 2006. GM's share fell 3.2 percentage points (from last January) to account for only 22.5% of all new vehicle sales in the month. Ford also lost share, down nearly three percentage points (from last January) to only account for 14.8% of the industry volumes.

The winners? Asian automakers, on the other hand accounted for 42.3% of all new vehicle sales in January 2007 versus 37.7% last year. The European vehicle brands (BMW, Mercedes, Porsche and Volkswagen), also gained share, accounting for 6% of all new vehicle sales in January 2007 versus 5.3% in January 2006.

A little more specifically among brands, Nissan, saw its market share climb 1 full percentage point to 7.6% of all new vehicle sales. Toyota's share climbed over 2 percentage points to 16.2% of all new vehicle sales (versus 14.1% last year). And Kia gained half a percent (to 2.1% from 1.6% last year). Among the European brands, Mercedes was the big winner, also gaining half a percent of market share to 1.6% of all new vehicle sales versus 1.1% last January.

Comments

[OJO Zafado:]

This percent this and this percent that. No information on the actual number of new cars sold in the US in 2007. The total is what is germain to whether the US consummer is maintaining or losing their ability to purchase. I am as disinterested in how many vehicles Ford sells as I am in caring what brand my next new vehicle will be. We are looking for the best mid sized vehicle with the best price and 0% 5 year or longer financing. Jeep sells $30K Cherokees with no luggage rack and a back seat that does not slide back to take advantage of the cavern behind it. Most SUVs are still purloined in bleak ugly dull gray, blue ,green army coloors. $30K for an SUV with no luggage rack or rail. This improves highway milage as if you would be using this <18 mpg vehicle as a commuter car!

2008 Mar 19 07:20 AM