Auto sales in U.S. set record in July

Big 3's employee-pricing promotions helped boost total sold to 1.8 million

August 03, 2005|By KNIGHT RIDDER/TRIBUNE

DETROIT - Auto sales in the United States surged to their highest monthly level ever in July, on the strength of easy-to-understand employee- discount programs offered by domestic automakers, and what appears to be a strengthening national economy.

The surge, revealed when automakers released their results yesterday, left local automakers with smaller-than-normal inventories of cars and trucks across the country, although none of them announced plans to increase production at factories.

The employee-discount programs, which translated into a few hundred dollars in savings per vehicle for consumers, drove sales to a total of 1.81 million vehicles last month.

July bested the industry's performance in October 2001, when General Motors Corp. launched its "Keep America Rolling" incentive program that offered zero-percent financing, after the Sept. 11 terrorist attacks. Automakers sold 1.73 million vehicles that month.

More than 61 percent of the monthly sales went to vehicles made by GM, Ford Motor Co. and the Chrysler Group. All three posted double-digit sales gains in the month.

Sales were up 15.2 percent at GM, which unveiled the Employee Discount for Everyone program in June. They grew 28.5 percent at Ford and 26.6 percent at DaimlerChrysler AG's Auburn Hills, Mich.-based Chrysler Group, as those two automakers added their own employee-discount programs. Including Mercedes, DaimlerChrysler AG sales climbed 25.1 percent.

George Pipas, Ford's U.S. sales analysis manager, said the results made the automaker feel like it was "Christmas in July."

Sales of light trucks, which generate more profit than cars, were strong. Sales of pickups, sport utility vehicles and minivans were up 25.4 percent, while car sales increased a more modest 4.4 percent. Ford said its F-series pickup truck had the best monthly sales for a single vehicle since the days of the Model T of the 1920s.

The monthly selling rate industrywide, which takes into account the number of selling days in the month, was the second-highest on record. If the July sales rate were stretched out over a full year, and adjusted for seasonal factors, nearly 21 million vehicles would be sold.

As a result of the performance, the number of vehicles available in GM showrooms dropped to 695,642 nationwide. That's 465,133 fewer vehicles than GM had in stock last year and helped curb swelling stocks of cars and trucks.

"Our inventory levels are extremely low, and that's a challenge for us," said Paul Ballew, GM's executive director of global market and industry analysis.

Foreign competitors did not post such strong gains, but many had record months nonetheless. Sales were up 15.0 percent at Nissan, 10.3 percent at Honda and 8.1 percent at Toyota.

Despite the surge by the domestic automakers, year-to-date sales for GM, Ford and Chrysler are up a much smaller 3.9 percent through July, compared with the seven-month period a year ago, according to Autodata Corp. of Woodcliff Lake, N.J. Asian competitors are up 6.4 percent for the comparable period.

But the wild success of the employee discount program may curb sales growth going forward.

Many sales analysts are expecting sales to slow down in the coming months - a phenomenon called payback. That's when a strong month of sales is followed by slower months, largely because consumers who intended to buy a product were pulled into the market earlier than they might have otherwise been. Payback tends to even out the results, unless demand is actually growing.

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