May Auto Sales: What Went Wrong for the Automakers?

During market hours on June 3, the U.S. automakers reported auto sales for the month of May. And the results were dismal. This shouldn't come as any great surprise as the reasons for the sharp declines have been all over the newscasts, newspapers, and websites around the country for a quite some time.  Higher gasoline and food prices are being blamed the most for the drop in auto sales.  Additionally, the worst performing area for May's sales were trucks and SUVs.  Please try to control your surprise at that last line. 

 

Even the once invincible Toyota Motors (TM) seems to have gotten caught with its hand in the cookie jar, as it indicated on Monday that auto sales for 2008 would be pressured as a result of slower SUV and truck sales. According to the company, there is a still a demand for the higher margin vehicles, however, with a gallon of unleaded gasoline costing $4.00, sales have slowed.  I guess Toyota is ahead of the game compared to Ford (F) and General Motors (GM). General Motors indicated yesterday that it would shut down four SUV and truck plants, this on the back of Ford's announcement last week that it was concentrating on smaller vehicle sales.  General Motors' CEO Rich Wagoner indicated that 11 of the next 12 product releases for GM would be in the small car or crossover vehicle arenas. 

 

 

Toyota's results were the closest yet to eclipsing General Motors' monthly sales. The surge in gasoline prices pushed Toyota's Camry and Corolla cars ahead of Ford's F-150 truck in monthly sales for the first time ever.  Topping all three was Honda Motor Corp.'s (HMC) Civic, which sold 53,299 units, as the automaker set a host of all-time U.S. sales records for the month, even outselling Chrysler for the first time.  Honda is challenging Chrysler's hold on the title of fourth-largest U.S. automaker.

 

 

Our favorite investment idea in the space is General Motors.  We believe that it's best positioned to capitalize on a growing WORLDWIDE auto market.  There is really no way to sugar-coat what the second quarter will be like for the U.S. automakers: ugly, plain and simple.  The glimmer of hope will come from overseas sales, where General Motors has a slight lead over Toyota.  Growth in China, India, and Russia is what is going to save Detroit, that and the help from the United Auto Workers (UAW) union. According to a study conducted by General Motors as part of this year's "Challenge X" competition:

 

•  Nearly 9 in 10 women (88%) say they'd rather talk to someone who owns the latest fuel-efficient car versus the latest sports car.
• Eighty percent of American car buyers would find someone with the latest fuel-efficient car more interesting to talk to at a party than someone with the latest sports car.

 

Moving forward, maybe Detroit should start polling more women to see what men should be buying.

Comments

[AskPatty]

Great article and your point " Moving forward, maybe Detroit should start polling more women to see what men should be buying. " Is right ON point.

Jody DeVere
CEO/President
AskPatty.com
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