Join Date: Jun 2001
Location: Catonsville, Md.
Car sales expected to pick up speed
From the Detroit Free Press:
Car sales expected to pick up speed
But U.S. automakers unlikely to capitalize
June 25, 2004
BY JEFFREY MCCRACKEN
FREE PRESS BUSINESS WRITER
Despite getting off to a slow start, U.S. auto sales should continue to pick up the rest of this year and well into next year, a leading automotive forecast firm said Thursday. Unfortunately for Detroit, the firm doesn't expect much or any of that growth to come from the former Big Three.
Rising employment levels and interest rates that remain historically low should combine to push sales of new cars and trucks to an annual pace around 17 million for the rest of 2004, up from the actual 16.6 million sold last year and the 16.5-million pace for the first quarter of the year.
Next year, U.S. sales should hit at least 17.2 million, said Global Insight, a Massachusetts-based research firm, growing to more than 17.5 million in 2006, which would be an all-time record for vehicle sales. The best year in U.S. vehicle sales was 17.36 million in 2000.
Further driving sales up is the fact that General Motors Corp. and Ford Motor Co. still have far more unsold cars and trucks sitting on dealer lots than usual, which probably means higher incentives like cash-back rebates or low-interest loans to lure buyers this summer.
"The economic fundamentals are starting to look good, and the beginning of the year should be the low point. There are lots of people who want to buy and more people or families who can afford to own a second or even a third car," said George Magliano, Global Insight director of auto industry research. But while Global Insight is bullish on the overall industry's future, it is decidedly bearish on the fortunes of GM, Ford and DaimlerChrysler AG's Chrysler Group.
It projects Detroit's automakers will lose share of the U.S. market in 2004 and continue to do so through at least 2009. By 2009, it expects Toyota to essentially tie Chrysler Group in annual U.S. car and truck sales, which if it happened would be a first in the U.S. automotive market. The group's calculations do not, however, factor in U.S. sales of Mercedes-Benz, which is also part of DaimlerChrysler.
Detroit's three automakers had 63.2 percent of the U.S. vehicle market in 2003, down from 64.6 in 2002. Five years ago, Detroit's automakers had about 70 percent of the market, with one percent equaling about 168,000 vehicles. The last U.S. automaker to gain annual share was GM in 2002.
"We expect good things for auto sales in 2004 and beyond, but the Big Three is having problems," said Magliano, whose firm held a presentation in Troy on Thursday on the outlook for the North American auto industry.
"We expect they lose a combined 7 to 8 points of market share by 2009."
Among the reasons Global Insight is so cynical about market share for GM, Ford and Chrysler is an expectation Ford's eventual Taurus replacement will be unable to sell as well as the long-running Taurus and concerns GM's strategy of using incentives to sell new cars and trucks will hurt the automaker long-term.
The firm also notes sales have disappointing so far this year for two new Ford products, the Ford Freestar and Mercury Monterey minivans, and that sales have been slower-than-expected on the new Chevy Malibu.
"We have increased our forecasts for the two new Chrysler products, the Dodge Magnum and Chrysler 300, but the Pacifica has not met expectations and some of Ford's new products have been very weak," said Catherine Madden, Global Insight auto analyst.
She estimated Detroit's automakers use just 81 percent of their auto-plant capacity because U.S. consumers don't demand as many of their cars and trucks as they have the ability to make.