Wednesday, November 4, 2009

Auto Sales Bounce Back from Post-Clunkers Lull

The U.S. auto sales reported for October suggest an industry operating at an even keel — not one in the kind of distress than many observers, including myself, had imagined. Sales were generally the same as in October 2008, the first time in two years that sales were not lower than the year before. This should not be taken as a trend, though, nor as a major accomplishment. If you remember the doom and gloom coming from Washington last October, that month set quite a low bar for the auto industry to clear. Still, auto dealers recovered from the post-Clunkers hangover faster than expected, and this is a reason to hope that auto sales could stabilize at a level around 1/3 lower than what was seen in the years before the recession.

The news is not good for General Motors or Chrysler, however. Chrysler sales are down 30 percent from a year ago. General Motors sales are up 5 percent, but these came as a result of the largest incentives of any automaker in recent years. The incentives are necessary, as General Motors still has a huge inventory of model year 2009 vehicles to clear out, including everything that is left of the Saturn and Pontiac nameplates. But the high incentives mean that General Motors is probably still losing money on most of the vehicles it sells. Worse news for General Motors, though, is that it has failed to sell either Saturn or Opel, two sales that it was counting on as part of its return to solvency. Instead, General Motors will wind down Saturn in the coming months and try to keep Opel going, though the division (which includes the Vauxhall nameplate) is continuing to lose money rapidly. At least the sale of the Saab division appears to be a done deal.

The news is much better at Ford, which saw sales increase by 3 percent from a year ago while its per-vehicle incentives fell 25 percent. With its recent financial statements, Ford showed a profit for the third quarter and said it could return to regular profitability in 2011.