Foreign Firms Pass Detroit in U.S. Auto Sales For First Time
Thursday, August 2, 2007
Led by Toyota, foreign automakers captured more than 50 percent of the U.S. vehicle market in July -- yet another bitter milestone for Detroit's beleaguered auto giants.
The shift came during a month that most in the industry would rather forget. Overall, U.S. vehicle sales sank 12.3 percent from July 2006, according to industry research firm Autodata. Detroit automakers ended the month with 48.1 percent of the U.S. market, the first month they've dropped below 50 percent. A year ago, they held 52 percent.
At General Motors, July sales sank 22.4 percent, to 312,623 vehicles. Ford's sales dropped 20 percent, to 179,218. Chrysler's sales fell 8.4 percent, to 137,728. Most foreign automakers also reported sales declines for U.S. sales in July, though most outperformed Detroit.
Toyota's sales fell 7.3 percent, to 224,058, edging out Ford as the nation's No. 2 automaker by sales. Honda reported a 7.1 percent decline. Nissan's sales were up 1.7 percent for the month.
Summer is typically the industry's high-volume selling season. Auto officials and analysts blamed the softening on fallout from the weakening housing market.
Rising home values had been a big contributor to booming car sales in recent years. With home prices falling, car buyers are holding back -- even wealthy ones.
"Different demographics, including the upper-middle class may be postponing purchases," said Jesse Toprak, industry analyst with Edmunds.com. "They are really not in the mood to make a large purchase right now."
Analysts said one reason GM and Ford are suffering is that officials purposely pulled back from selling large volumes of cars to rental fleets. Such sales don't carry much profit but contribute to a company's market share.
The slowdown could be a boon for car shoppers, as auto companies bump up discounts. GM is warning rivals that it will counter aggressive discounting in the pickup truck market.
"We don't want to have to pull the incentive levers," said Paul Ballew, GM's chief market strategist. "If you have everybody throwing hand grenades at you, you have to respond."
Deteriorating industry conditions are sure to cause more pain for Detroit's automakers. Lost market share is difficult to win back.
If the market doesn't pick up, the sales slowdown will continue to complicate the financial outlook for carmakers. The three Detroit auto companies are waging cost-cutting campaigns. They've closed plants, cut jobs and sold off some of their best assets.
"There is no question there has been a tremendous change in the market over a long number of years," said Dana Johnson, chief economist of Comerica bank. "What the numbers tell you is that consumers have more, and more learned to prefer foreign cars."
Japanese automakers have been much healthier. They enjoy lower U.S. labor costs, positive foreign exchange rates and more popular product lines.
Toyota's Lexus brand sold 27,141 in July -- nearly double the sales of Ford's entire European luxury line from Volvo, Jaguar and Land Rover.
Shoppers also are gravitating toward small, fuel-efficient models, market segments where Japanese rivals lead.