GM Posts Gains from New Models, as Struggling U.S. Market Falls 2.9% in January

The year has started as expected for the U.S. market, sales falling 2.9% year-on-year (y/y) in January. Total volumes stood at 1.059 million units, giving a seasonally adjusted annual rate (SAAR) of 15.8 million. Nearly every single automaker posted a sales decline in the month as economic headwinds caused the market to increasingly teeter towards recession. Consumer confidence continues to wane, housing foreclosures continue to hit new highs, and fuel prices remain elevated, all putting pressure on automakers in the retail arena.

GM, BMW, Mercedes-Benz, and Mazda were the only automakers to register increases for the month. In contrast, Ford, Honda, Toyota, Chrysler, Nissan, and Hyundai all posted declines in line with the difficult market.

General Motors (GM) bucked the market trend, posting a remarkable 2.6% y/y increase in sales to 250,926 vehicles. Leading GM's sales increase were the new Chevrolet Malibu and Cadillac CTS. The Malibu has the industry's fastest turn rate, with an average dealer lot stay of just 16 days. Chevrolet sold 14,541 Malibus in January, a 58% increase over the same period in 2007, when the old-style model was still in production. Cadillac's CTS sedan has also been an unqualified hit for the company, posting a 95% y/y increase in sales during January. GM's full-size crossovers are also enjoying significant success, with combined sales of the GMC Acadia, Saturn Outlook, and Buick Enclave up 134% y/y in January.

Toyota did not fare as well, its sales falling 2.3% y/y during the month to 171,846 units. The company's products were hit across the board, with the Tundra pick-up seeing much softer sales than was the case during much of 2007. At 12,073 units, January sales for the Tundra were up significantly y/y, but the comparison is invalid since the Tundra was still in launch mode during January 2007. A better comparison is with December 2007, which shows Tundra sales tumbling 37.2%. Toyota had a better month with the Prius hybrid, its sales up 37% y/y. "On the retail front, consumers are sitting in the catbird's seat, with falling interest rates and a competitive market giving rise to showroom values", Jim Lentz, president of Toyota Motor Sales U.S.A. Inc., said in a statement. Toyota's group vice-president and Toyota Division general manager Bob Carter blamed the sales decline on a lack of inventory of the Camry and RAV4 models, and admitted that the company's sport utility vehicles (SUVs) are also struggling, with the FJ Cruiser posting a 37% y/y sales decline in January, and sales of the 4Runner falling 25% y/y.

Ford took third place in the market during January, with the company's crossovers selling very well during the month, although this was not sufficient to overcome deficiencies in the car business and pick-up segments. Ford sales dropped 3.9% y/y, despite gains of 44% y/y for the Focus, a doubling of sales for the Ford Edge/Lincoln MKX crossover, and a 33.1% improvement in sales of the Escape CUV. Like all other major automakers, Ford's full-size pick-ups took a tumble, sales dropping 8.4% y/y, in line with similar declines at GM and Dodge. Chrysler took a bigger hit, its total sales falling 12.1% y/y. The Dodge brand fared better, with the Avenger experiencing a 42% y/y jump for the month, along with the Charger, Caliber, and Viper. But Chrysler brand sales fell 17% y/y, helped in no part by a 56% drop in Town & Country minivan sales (the Dodge Grand Caravan fell 20%), leading to some concern over the health of the company's redesigned minivan.

Outlook and Implications

The overall market was, as predicted, softer for nearly all automakers in January, in the face of economic headwinds that are worsening despite attempts by the Federal Reserve to spur improvement through prime interest-rate cuts. The effects of this monetary policy are unlikely to translate into lower interest rates for auto loans for some months yet, but it is hoped that the psychological effect will help bolster consumer confidence levels to the point where consumption begins increasing. This was not the case in January, with the market continuing to slide towards lower numbers, as higher housing costs, fuel costs, and food costs are still weighing down on consumers and putting them off making high-dollar purchases.

On an individual basis, the month was truly a success for GM, and the first real evidence of the validity of the company's product-driven turnaround. All of the company's newly introduced products, including the Lambda-platform crossover trio, the Chevy Malibu, and the Cadillac CTS, have been very well received by the various media outlets, and it would seem that the consumer is taking notice. In a market where the much-vaunted Toyota has struggled to sell Camrys and RAV4s, GM is selling every Malibu it can produce, with dealers wishing they could have more. This must be put into perspective: although GM sold 14,000 Malibus, Toyota still managed to move over 31,000 Camrys in the same period, and the latter model is in no danger of losing its crown any time soon. However, it is possible that the lacklustre sales increase for the Camry in January (up just 0.4% for the month) was down to the advertising blitz and media coverage of GM's new mid-size entry.

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