Truck and SUV Sales Plunge as Gas Prices Rise
Tuesday, October 4, 2005
Sales of Detroit trucks stalled in September as spiking gas prices sped up a consumer shift toward more fuel-efficient vehicles.
In the first look at sales since Hurricane Katrina drove gasoline pump prices to $3 a gallon and beyond, sales of passenger cars grew last month while large, fuel-thirsty sport-utility vehicles languished. Overall, industry sales in September slid 7.6 percent from a year ago.
General Motors Corp. reported a sales drop of 24 percent compared with the same month a year ago. Ford Motor Co.'s sales declined 20 percent. DaimlerChrysler Corp., the Detroit-based division of DaimlerChrysler AG, bucked the trend with a 4 percent gain in sales. The big Japanese automakers reported even stronger U.S. sales in September, with most posting increases of 10 to 12 percent, as consumers snapped up Japanese passenger cars and smaller trucks.
The month could prove to be a turning point as consumers gird for the long-term effects of high gas prices, said auto marketing analyst Art Spinella of CNW Marketing Research Inc. in Bandon, Ore. "The market changed as it often does. Frequently that means Detroit gets left behind. It never fails."
Yesterday Standard & Poor's put both Ford and GM under review for possible downgrade of their credit ratings out of concern over competitive pressures.
Hurricanes Katrina and Rita heavily damaged oil production in the Gulf of Mexico. The storms crippled refineries that turn oil into gasoline. This has tightened the supply of gasoline, causing pump prices to spike. According to the Energy Department, the average national price for a gallon of unleaded gasoline is nearly $2.94. That's up 12.4 cents from a week ago. Gas pump prices are up 99 cents from a year ago.
In calls with reporters and financial analysts yesterday, Ford and GM officials played down the impact of higher gas prices on sales. Sales officials from both companies said the September slump was the result of "payback" from this summer's blockbuster employee-pricing deals. The deals drove sales for Detroit automakers to their highest levels in years as consumers seized the opportunity to pay the same discounted price as company employees. After all the summer selling, GM and Ford said they had limited inventory for consumers to pick through, causing sales to fall last month.
Paul Ballew, GM's chief sales analyst, described GM's September sales as "comforting" and "consistent with what we expected."
But Spinella said Detroit has a perception problem among consumers who are not aware that U.S. automakers offer many fuel-efficient sedans and small cars. Instead, customers are buying the few hybrid cars on the market as well as smaller cars and little sport-utility vehicles from import companies.
At Honda, sales of the Civic, one of the industry's most popular small cars, grew 37 percent from a year ago. Honda reported a 25 percent sales increase in the gasoline-electric hybrid version of the Civic. Sales of the hybrid Toyota Prius nearly doubled, to 8,193 for the month.
Chrysler's performance was helped by a 69 percent increase in sales of the Dodge Neon, a car that the automaker is phasing out and barely marketing. At GM, sales of the Chevrolet Malibu rose 25 percent while sales of the Korean-built Aveo subcompact car were up 25 percent.
At Ford, trucks and SUVs -- the backbone of the company's sales and profits -- struggled through September. Sales of F-Series pickup trucks plunged 30 percent. Sales of Ford's large SUVs, including the Ford Explorer and Expedition and the Lincoln Navigator, sank by more than 55 percent each. At GM, overall sales of trucks, minivans and SUVs dropped 30 percent. Truck, SUV and minivan sales also fell at Toyota and Honda, as well as at Chrysler.
The heat is being felt on Capitol Hill. Last month, Sen. Barack Obama (D-Ill.) offered a proposal to raise federal fuel-economy standards in cars and trucks by 3 percent a year in exchange for the federal government picking up the costs of retiree health care. Detroit automakers say the costs are a crippling burden in competition with foreign rivals.
Ford chairman and chief executive William Clay Ford Jr. sent a letter last month asking the Bush administration to convene a summit of automakers, suppliers and oil companies to find a solution to the nation's energy woes. Mike Jackson, chairman and chief executive of AutoNation Inc., the nation's largest publicly traded dealer group, is calling for a yearly increase of 10 cents per gallon in the gasoline tax over the next decade. Americans already pay an average of about 44 cents per gallon in combined local, state and federal taxes.
Rep. Sherwood L. Boehlert (R-N.Y.), chairman of the House Science Committee, said the atmosphere on Capitol Hill for increasing vehicle fuel-efficiency standards is as good as it has been in years. He said he would try to tack a fuel-efficiency amendment onto energy legislation currently moving through Congress, possibly as early as this week. Even though similar efforts have failed in the past, he said Hurricane Katrina has changed the dynamic. Congressmen are hearing from the people back home, Boehlert said.
"Faxes are on overdrive," he said. "Phones are ringing off the hook, and the mail is coming in by the ton on Capitol Hill: Do something about the high price of gasoline."