Ford, Chrysler retail sales lag

Automakers trail GM, Toyota in 3Q market share, estimates show

November 01, 2006|By DETROIT FREE PRESS

DETROIT -- Sales of new vehicles from dealer showrooms have been worse for Ford Motor Co. and DaimlerChrysler AG than the companies' already-weak figures from July to September suggest - largely because sales to rental car companies, businesses and governments camouflage how slowly their vehicles really are selling to consumers.

The quarterly estimates of U.S. retail-only market share were prepared for the Free Press by the Power Information Network, a subsidiary of consumer research firm J.D. Power and Associates.

Toyota Motor Co. is strongly in second place at 17.8 percent, 4.2 percentage points behind General Motors' steady 22 percent, but easily ahead of Ford's 16.1 percent.

The retail numbers are in contrast to total monthly sales reported by individual automakers, which include fleet sales. Those numbers have shown Ford holding onto second in every month but July.

The estimates, based on data collected from more than 7,000 dealership franchises, show Ford and DaimlerChrysler losing retail market share between 2005 and 2006 to Toyota and, to a lesser extent, Honda Motor Co.

"It shows the true demand for products," Tom Libby, director of industry analysis for PIN, said. "It's a completely different marketplace than it was even 10 years ago."

GM, meanwhile, remained steady in the competitive marketplace. The world's largest automaker appealed to buyers with a refreshed truck lineup and a disciplined strategy of cutting sticker prices and easing off incentives, such as cash-back rebates and no-interest financing.

Still, the data show that foreign automakers have nearly won the heart of the country, with 49.6 percent of the retail market share - a more serious encroachment than figures including both retail and fleet suggest. Those overall numbers put GM, Ford and DaimlerChrysler with a more comfortable 56.8 percent of the U.S. market.

The retail market share report - the first of its kind - explains losses posted during the quarter by Ford and Chrysler. It also corroborates the suffering of dealers, many of whom are complaining about steeper-than-reported sales declines and higher inventory levels.

Today, all the major automakers will report their monthly sales results for October - but those figures won't tell the full story of how vehicles are selling. The companies will report their retail sales and fleet sales together, not individually.

Retail sales are a more trusted measure of demand for a product and the health of an automaker, industry experts say, because they include direct sales to consumers from dealerships and tend to be more profitable than fleet sales.

Fleet sales can obscure the picture because automakers can push more cars and trucks into the fleet market when their retail sales are weak. These bulk sales are usually heavily discounted, too. Sometimes, experts say, they aren't profitable at all.

Overall, Bob Schnorbus, chief economist for J.D. Power, estimates that between 18 percent and 25 percent of industry sales are to fleet customers.

Schnorbus said U.S. retail sales are down 3.5 percent for the year, or by about 500,000 sales. While higher gas prices, a decline in the housing market and a slowdown in the economy played a role, he primarily blamed a lack of incentives for the decline. Automakers try to minimize profit-cutting incentives, but dealers, particularly for Chrysler, have been calling for such steps to help move vehicles off their lots.

During the third quarter, retail sales were off 2 percent from 2005.

Ford and Chrysler did the poorest job of holding onto the retail customers who stayed in the market, and each automaker has been handling that setback with a different strategy.

Ford's retail share fell to 16.1 percent in the third quarter of this year, down 2.8 percentage points from 18.9 percent a year ago.

The dismal retail performance contributed to Ford's 10 percent decline in sales revenue, to $36.7 billion, as well as the company's $5.8 billion loss in the quarter. Ford's response: Build fewer cars and trucks. Ford announced a historic 21 percent cut in production for the last three months of the year, which will mean 168,000 fewer new cars and trucks for dealership lots. Another 8 percent to 12 percent production cut will follow in the first half of 2007.

At DaimlerChrysler, retail market share fell to 12.3 percent during the July-September period, down from 14.3 percent a year ago.

While DaimlerChrysler earned an operating profit of $1.13 billion in the quarter, thanks mostly to the Mercedes division, Chrysler Group booked a $1.5 billion operating loss, largely due to a 26 percent decline in sales revenue. Chrysler's sales fell to $12.1 billion from $16.4 billion.

The sales slowdown at the Chrysler Group has caused vehicles to stack up at dealership lots across the country, with tens of thousands more crowding storage lots around Detroit. It took Chrysler 110 days, on average, to sell a vehicle during most of October, PIN reports. Chrysler has also said it will cut back production in the fourth quarter, by about 45,000 vehicles, although some dealers say that is not enough.

More than anything, the retail share numbers provided to the Free Press show the strength of Toyota, which is more popular than ever with consumers.

Toyota's retail market share during the third quarter grew to 17.8 percent, up 3.7 percentage points from a year ago.

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