Automakers emerging from the worst year since 1970 are cautiously optimistic that a recovery is under waylast year’s collapse in U.S. auto sales.executives and analysts said Tuesday they expect car and light truck sales to rise to 11.5 million orthis year from 10.4 million in 2009, bolstered by a strengthening economy.
The most bullish analysts forecast sales exceeding 13 million vehicles — still far below the market’s peak of 17.4 million at the start of the last decade when business was booming for Detroit’s Big Three
“Normalcy is about two years away,” said Jesse Toprak, an auto analyst at pricing and sales forecaster Truecar.com.
The slide in sales began in 2005 and accelerated in 2008, driving two of Detroit’s automakers into bankruptcy last year and pushing their Japanese archrival Toyota Motor Corp. into the red for the first time since 1950.
But executives were encouraged by December’s sales, which marked the fourth consecutive monthly increase in the annualized selling rate. Automakers also reported strengthening demand for both large and small vehicles.
“We’re now in a recovery stage,” said Ellen Hughes-Cromwick, chief economist at Ford Motor Co., which reported a big jump in December sales.
Consumers are feeling encouraged by positive economic news and rising financial markets, Hughes-Cromwick said. “It will take clear evidence of job and income gains to declare a full recovery, and we think that’s likely to gel in this quarter,” she said.
Many executives remain cautious but few still worry about a dreaded double-dip recession. “For the most part, we’ve ruled that out,” said General Motors Co. global industry analyst Mike DiGiovanni.
But, he said, consumer confidence is fragile, oil prices may rise as the global economy expands and the U.S. jobless rate is likely to remain around the 10 percent mark next year. “So we have to balance our optimism with some caution about the outlook for 2010.”
GM ended a tumultuous year — and decade — as the U.S. market leader, which was encouraging, DiGiovanni said, “given all we’ve been through, with bankruptcy and restructuring.”
But over the past 10 years, GM and Ford have lost a big chunk — more than 14 points — of the U.S. auto market.
Toyota and other Asian automakers were the biggest gainers, but the European automakers also made quiet headway. European brands nearly doubled their combined share of the U.S. auto market to 8.4 percent in 2009 from 4.9 percent in 2000.
“This race can get even tighter,” predicted Jessica Caldwell, an analyst at online auto research site Edmunds.com. “You really saw GM lose some ground to Toyota in 2009, but Toyota has lost a lot of ground to Ford.”
Domestics geared to compete
Although 2009 was a terrible year for the domestics, they will be more competitive against foreign rivals this year and next after slashing their costs, shedding debts in government-directed bankruptcies and restructuring operations and dealer networks.
Ford — the only U.S. automaker to avoid bankruptcy in 2009 — was the best performer among the domestics in December. It reported a stunning 33.5 percent jump in sales, its biggest monthly gain since March 2008.
The Dearborn automaker said demand improved across its model range, with sales of both the Fusion compact and F-Series full-size pickup showing double-digit gains last month.
For both December and the year, the F-Series was the best-selling vehicle in the market, followed by Toyota’s Camry sedan.
GM reported a drop in monthly sales, but its executives noted that GM’s fleet business was down in December, while Ford said sales to fleet customers surged more than 70 percent.
Automakers typically prefer retail sales through dealerships to fleet sales, which have thinner profit margins, but Ford executives welcomed fleet customers.
“It suggests that an important sector of the economy, namely the business sector, is becoming more optimistic,” said George Pipas, Ford’s sales analyst. It also signals greater availability of credit; a credit squeeze had sharply curtailed sales in 2009.
Chrysler Group LLC didn’t release a breakdown of fleet and retail sales but its rivals and analysts said much of the Auburn Hills automaker’s business was with fleets. “We estimate they sold 50 percent to fleets, which is an astronomical number,” said Caldwell of Edmunds.com.
A Chrysler spokeswoman would not comment on the December results but said fleet business was expected to account for 25 percent of its annual sales.
Chrysler’s December sales were down 3.7 percent. For the year they fell 35.9 percent — the biggest decline posted by any major automaker — to less than a million vehicles, the lowest sales since 1962. Honda Motor Co. moved ahead of Chrysler in December, to become the fourth-largest player in the market.
Wes Lutz, owner of Extreme Dodge Chrysler Jeep in Jackson, said he is glad 2009 is over. “How could you get worse than that? How much more downsizing can you go beyond bankruptcy?”
But his December sales were better than last year, and he said he expects January to be stronger and the year to continue to improve.
Toyota reported a 32.3 percent increase in sales in December, and said it led the market in retail sales. But its sales were down 20.2 percent in 2009, which was a bad year overall for the Japanese automaker. It lost money in the United States, where it now has too much production capacity, and it recalled more vehicles for safety issues than any other automaker.
Hyundai Motor Co. and its Kia Motors affiliate were the only major automaking group to record a sales gain in the U.S. last year. Their share of the market increased to 7.1 percent from 5.1 percent a year earlier and 2.3 percent in 2000.
Outside the auto industry, economists expect 2010 to show slower growth than last year, with unemployment continuing to rise and peaking in the first six months.
Interest rates are expected to stay low until job growth picks up but a full employment recovery will take years.
Analysts and economists say that in addition to the emerging economic recovery, auto sales in December were helped by two additional selling days in 2009 and a tax deduction for car purchases included in the U.S. government’s economic stimulus measures.
Sales are likely to benefit from pent-up demand from consumers holding on to old cars because of economic and job worries.
Skittish consumers have been saving and scaling back spending as the new frugality of the economic bust replaces the free-spending consumer culture of the last decade’s earlier boom.
Auto analyst John Murphy at Bank of America-Merrill Lynch predicted Tuesday that demand for light vehicles would rise in 2010 to “a more normal low” of around 13.3 million units.
But most auto executives remain cautious after having overestimated demand for 2009, when sales ended up 21.2 percent lower. While GM’s end-of-year forecast of 10.5 million vehicles was close to the mark, Ford and Chrysler’s forecasts were considerably higher.
By February, the annualized selling rate slumped to a previously unthinkable 9.1 million cars and light trucks, the year’s low point.
According to Edmunds.com, sales last year fell to the lowest since 1970, when, Edmunds said, there were 70 million fewer people in the United States.
“For 2010, I’m leaving my seat belt on,” said Ford Vice President Ken Czubay, “because I think volatility will be part of the new norm.”