U.S. auto sales seen rising in January
By DAVID RUNK
DETROIT

Gas prices may be lower than they were most of last year, but consumers still want to buy fuel efficient vehicles, giving Asian automakers' sales a boost over Ford and GM in January.

Industrywide, sales for the month could be up nearly 1 percent to nearly 1.2 million compared with January 2006, when strong fleet sales propped up results, according to estimates from Edmunds.com, a research Web site for car buyers. Companies report January sales Thursday.

Jesse Toprak, chief economist for Edmunds.com, said Toyota Motor Corp. likely will post double-digit gains and Honda Motor Co.'s sales could rise nearly 10 percent.

The Honda Civic, which was redesigned this past year, did particularly well, while all Toyota products sold well, Tropak said. Neither carmaker had anything new to hit the market in January.

Despite a recent retreat in gas prices, Tropak said fuel efficiency -- a strong point for Toyota and Honda -- remains key.

"Consumers have no confidence in gas prices," Toprak said. "They suspect they will be going back up anyway. It looks like in order to see a dramatic change in buying patterns, you need to see gas prices under $2 a gallon for no less than six months."

Last year, high fuel prices drove consumers away from General Motor Corp.'s sport utility vehicles and light trucks, forcing the automaker to cut production. Ford Motor Co. has said that it expects to further cut production in the first six months of 2007 as it works to bring manufacturing in line with lower demand for its products.

"If you make less cars, you are going to sell less cars," Toprak said. "Some products haven't quite hit the showrooms full force. GM has new trucks, but it will take about six months to introduce all cab sizes and engine sizes in the U.S. market."

Toyota has continued to gobble up market share and in 2006 passed DaimlerChrysler AG as the No. 3 auto seller in the U.S. for the first time during a full calendar year. This year, Toyota is expected to take Ford's No. 2 spot in U.S. sales after its sales surpassed Ford's in two months last year.

Toyota likely will beat Ford again in January, analysts say.

For the year, Chrysler has said its sales are expected to be slightly higher than in 2006, when they dropped 5.5 percent, as the company introduces eight models, including the mid-size Avenger sedan and Chrysler Sebring convertible. It hasn't made January estimates, but Edmunds.com expects Chrysler's January sales to be down about 2.6 percent.

Last week, GM said it expected sales for the month to be down from January 2006 as it continues to cut sales to rental-car companies. Sales to fleet customers also are expected to be down at Ford, which no longer is selling the Taurus -- once the nation's top-selling car. Daily rental fleets have lower margins and hurt the vehicles' residual values.

While the decline in fleet sales hurts overall sales numbers, GM and Ford have said they are trying to focus on sales to more-profitable retail customers as part of their North American turnaround efforts.

Without the 174,800 Tauruses that it sold last year, Ford has said that its sales likely will be down each month this year compared with the same month in 2006. But George Pipas, Ford's top sales analyst, said there has been interest in the recently introduced Ford Edge and Lincoln MKX crossovers.

"The retail business is holding up pretty well," Pipas said.

Although January typically is a weak month for auto sales, analysts say inquiries about new car buying have risen.

"Shopping interest seems fairly strong," Jack Nerad, executive market analyst for Kelley Blue Book, said of traffic on the company's auto pricing Web site. "Most of the brands are up and many in double digits in terms of interest."

At Saturn of Oak Lawn in suburban Chicago, general manager Jeff Michor said high gas prices last year pushed some shoppers to consider hybrids, but with gas prices down they're less of a focus.

Michor, who has been with the dealership since it opened in 1996, said showroom traffic this month and last month has been the best he's seen for the time of year. He credits GM's rollout of a broader product line for Saturn, including the mid-sized Aura car and the Outlook crossover.

"Now, there's something for everyone in our store," Michor said last week. "We're appealing it seems to a much larger audience. Most of these people who come in are not generally GM buyers."

Analysts Gloomy

This month, Ford sales are likely to be off by 17.5%, nearly double the next biggest loss at GM. The company should sell around 174,000 units, down 22.7% from the preceding month and the biggest December-to-January loss of any manufacturer. Market share would drop to 15.1% from 17.7% in January, 2006.

Worse yet, analysts don't see much to get excited about in Ford's 2007 product portfolio. The Ford Edge (see BusinessWeek.com, 10/18/06, "First Drive: Ford's Edge") and Lincoln MKX (see BusinessWeek.com, 1/17/07, "Lincoln's Budget Bling Crossover"), two crossover vehicles that pair SUV practicality with car-like handling and fuel economy, have just become available to consumers. But at 2,201 units in December and an expected 2,500 by the end of this month, those models are a long way from making a dent in the bottom line. "Ford is hurting on so many fronts right now, you can't ask the Edge to save the company," says Erich Merkle, director of forecasting at IRN Inc., a Grand Rapids (Mich.)-based automotive research group.

Chrysler, meanwhile, is expected to post declines of 6.5% on sales of 151,000 vehicles. That would represent a 20.5% drop in sales from the previous month and a marginal market-share decline to 13.2% from 13.6% in January, 2006. The company's upcoming redesigned Town & Country minivan, shown in Detroit this month, earned applause from analysts. It could buoy results in 2007 as Ford and GM largely abandon the segment. But the company's heavy reliance on increasingly unpopular trucks and SUVs is still cause for concern.

Other Strong Returns

GM is the sole domestic anticipated to produce positive news on multiple fronts. Though sales are expected to be down by 9.4% to 277,000 vehicles, the company will likely nudge its market share up to 24.1%, from 23.5% in December, 2006. On the strength of new products, notably the Lambda platform-based Outlook and Acadia, analysts expect the company's GMC and Saturn brands to provide particularly strong returns for the month, up 13% and 17%, respectively. "Saturn is probably going to be one of the best performing brands in 2007," says Toprak.

What's more, new full-sized pickups from Chevrolet and GMC could prove popular with consumers, even as overall sales in the segment drop. Toprak suggests that, with those new products, GM could nab large-truck market share from Ford this year, increasing it to 45% from 40% by the end of 2007. Toyota's brand new Tundra (see BusinessWeek.com, 1/30/07, "First Drive: 2007 Toyota Tundra"), meanwhile, could move its market share up to 7% from 5%, also largely at the expense of Ford and Chrysler.

But don't expect a domestic resurgence built on pickup sales anytime soon. Volatile gas prices aside, the softening housing market could have nasty repercussions. Big-pickup sales closely track housing starts, says Merkle. Year-over-year, both are down more than 10%. And that's not good news for anybody in Detroit.