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A December to remember

by Bill Cawthon on

Even with severe weather in parts of the nation, December was a pleasant finish to an encouraging year and a relief after a tumultuous decade that saw light vehicle sales dive from near-record levels to the worst annual sales in years. December’s seasonally adjusted annualized rate (SAAR) came in at 12.55 million cars and trucks, the highest in 15 months. Total industry volume just missed 11.6 million sales.

Chrysler beat the most optimistic individual forecasts and almost doubled the analysts’ consensus. The Grand Cherokee, Wrangler and Liberty all had their best sales years since 2007 and the Ram pickup had its best year since 2008, coming within 348 units of hitting the 200,000 mark. Light trucks accounted for 85.8% of December sales, up from 69.0% in December 2009, but for the year, light trucks accounted for a slightly smaller percentage (73.8%) than they did in 2009 (75.4%). With the rollout of the new Avenger and 200 to favorable reviews and the refreshed 300 and Charger, look for Chrysler’s passenger car sales to improve in 2011. As noted in an earlier post, the Chrysler Town & Country recaptured the minivan crown for the year and the Dodge Grand Caravan stormed up for fourth place in November to take the top spot in December. Even the analysts are starting to notice some good things going on and Sergio Marchionne is openly talking about spending Fiat money to buy more of Chrysler for the first time.

General Motors also came in ahead of analysts’ predictions with December volume up 8.0% and year-to-date (YTD) volume 6.8% ahead of 2009. Deliveries totaled 2,211,699 and retail sales were up 29 percent: December was the best month for GM retail sales in 2010. Brand total (Buick, Cadillac, Chevrolet and GMC) sales came in 16.1% ahead of December 2009 and finished the year a whopping 22.0% ahead of 2009. All four remaining GM brands beat their 2009 totals by double digits, led by Buick where sales were up 51.9 percent. The Camaro won the 2010 pony car sales race in a walk. Chevrolet delivered 326 Volts in December and GM management is already planning to ramp up production. (Note: our numbers differ from GM’s official figures because we exclude C, T & W-series trucks and the Kodiak/Topkick medium trucks included in their report.)

Ford 2010 sales came in 19.5% ahead of 2009, a margin Ford is claiming as the best of any full-line automaker (that depends on one’s definition of “full-line”). As was true of General Motors, December sales surpassed analysts’ estimates, up 6.8 percent. The F-Series had its best sales year since 2007 and was the first vehicle line to break the 500,000-sale mark since 2008: it was also the only vehicle to break the 500,000-sales mark in 2008. The F-Series is closing on its third decade as the best-selling vehicle in America and has been the best-selling pickup for 34 years in a row. The Fusion easily blew past the Chevrolet Impala to become the bestselling American-badged passenger car and the Fiesta got off to a good start, outselling the Chevy Aveo, Honda Fit, every Scion and the Toyota Yaris. (Note: Ford numbers exclude Low Cab Forward and heavy trucks.)

With all these increases, the Detroit automakers increased their share of the total annual market to 45.1 percent, up 0.9% from a year ago. Detroit’s December share was actually down to 45.0% from 45.7% in December 2009.

Toyota was an object lesson in hubris and the variability of consumer opinion. Battered by recalls and negative press, including record government fines and critical downgrades from Consumer’s Union, Toyota lost the most sales volume and the most market share, down 2.73 points in December and 1.75 points for the year. The one-time golden brand also lost the second-place ranking it had owned for the past three years, falling more than 167,000 sales behind Ford. The Accord has outsold the Camry in recent months. The Camry did hang on to add another year to its record as the best-selling passenger car and Lexus remained the top luxury brand but it took record (for Toyota) incentives to support the sales.

Honda breezed through another year in fourth place, placing two cars in the Top Ten and watching the CR-V take the top spot among utes. It did give up the top minivan spot to Dodge for December and to Chrysler for the year. While sales were up 21.0% in December and 6.0% for the year, Honda did give up 0.41 points of market share for 2010.

Nissan rounded out the Big Six with a 27.0% improvement in December that capped an 18.0% gain for the year. The Versa, Sentra and Armada all had strong sales in December, as did the Frontier and Altima. Infiniti got a nice boost from the M which more than doubled in sales.

The second-tier Japanese companies all reported positive results in December. Subaru set a second consecutive annual sales record as Outback sales soared 68.3 percent. Mazda sales grew 17.7% in December, leaving it 10.5% ahead of 2009. Mitsubishi continues to make headway; December numbers were up 11.9% and it finished the year in the black by 3.1 percent. Suzuki saw a 40.4% jump in December as Kizashi sales exploded 1,124 percent, but the company still down 38.0% on a year-over-year basis.

Industry watchers were predicting this would be the year Hyundai/Kia passed Nissan in sales volume. Some even said the Korean automaker would pass Chrysler. Both brands came on strong, setting new annual sales records, but it wasn’t enough. Hyundai sales rose 23.7% in 2010 and Kia posted an 18.7% gain.

Volkswagen had its best December since 2005 and its best sales year since 2003. There were big jumps in sales of the new Golf, new Jetta and the Tiguan and Chrysler-built Routan. Audi reported its all-time best sales year in North America as sales topped 100,000 for the first time.

The battle for upscale supremacy between BMW and Mercedes-Benz ended with BMW the winner. Lexus still holds the top spot, but the competition for runner-up came down to a spread of a few thousand sales. Cadillac held down the fourth spot, followed by Acura, Infiniti, Audi, Lincoln, Volvo, Land Rover, Porsche, Jaguar and Saab. With the exception of Volvo, all of the luxury brands saw better sales in December. However, Saab still has a way to go to recapture its pre-GM glory.

Looking forward, the gradual improvement seems likely to continue. Increases in the price of gasoline have, so far, been taken stride and a run-up like the one seen in 2008 is unlikely; the conditions just won’t support oil at $150/barrel. 2011 should be good for 12.5 million sales. In fact, an increase similar to the one experienced in 2010 would put the 2011 market at nearly 12.9 million light vehicles.

As we look forward to a new decade, it might be worthwhile to take a look back at the ten years just passed. In 2001, the auto industry was coming off an all-time record sales year. Even with the tragic events of September 11, President Bush’s urging Americans to get out and shop did not fall on deaf ears: 2001’s total also exceeded 17 million sales, second only to 2000. Sales never again topped the 17 million mark, but from 2002 to 2005, sales maintained a brisk pace, averaging nearly 16.9 million a year. The Big Three were still dominant, though market share dropped from 63.24% in 2001 to 56.91% in 2005. By the end of 2005, sales at GM and Ford were down but Chrysler sales were up 1.39 percent. That’s right: Chrysler sold more vehicles in 2005 than it did in 2001. Contrast that with Ford where sales were down 21.56% from their 2001 level. In the middle of the decade, Ford was the problem child.

In 2006, there was a hiccup: domestic brand sales dropped over 785,000 units in a single year. Ford was in serious trouble and in 2006 it mortgaged every asset it had, raising more than $25 billion to stay afloat and bringing in Alan Mulalley to try to right the ship before it foundered completely. GM sales were also declining but GM only did the usual cost-cutting and piled on the incentives.

Chrysler got hit, as well, but its sales shortfalls were smaller than those of its hometown competitors. It wasn’t until the 2008 sales year, after Cerberus had acquired Chrysler from Daimler and installed Robert Nardelli as capo di tutti capi that Chrysler sales really crashed. Of course, this didn’t happen overnight: it had been obvious for some time that Daimler’s relationship with Chrysler was far more parasitic than symbiotic. All the promises of the original marriage had proven to be the empty words of a slick snake-oil salesman named Schrempp. Dr. Z had returned to Stuttgart to take over the real job for which he had been groomed and Chrysler was left to fend for itself. Saddled with long-standing quality problems, Chrysler was resorting to increasingly expensive incentives and increasingly risky car loans to move the metal. Chrysler was the leader in sub-prime auto loans to credit-challenged customers.

In retrospect, it’s difficult to see Cerberus’s acquisition of Chrysler as anything but a ploy to get Chrysler Financial, a business Feinberg and his colleagues understood, and break up and sell off Chrysler, a business they didn’t understand. Even in 2007, before the collapse on Wall Street, Cerberus couldn’t sell all the debt it had taken on to obtain Chrysler, even at steep discounts. Nardelli had no experience running a car company and, judging by his record, precious little aptitude for running any kind of company anywhere but into the ground.

2008 was the perfect storm: skyrocketing fuel prices took the heaviest toll on truck-dependent Chrysler; the housing market crash dried up financing sources and put acquisitions on hold; Americans were losing their jobs by the millions. Nardelli was busy gutting Chrysler, leaving it almost incapable of developing new product even if it had had the money for it. Nardelli had clamped down on corporate communications but the word was out: Chrysler was in deep trouble. Leasing was ended, cutting off one of the important ways dealers had been able to move Chrysler vehicles. Lending standards tightened, eliminating even more sales. Unfortunately, the truth was that there were no longer that many sales opportunities; Chrysler products really weren’t all that good. Tacky interiors, fit and finish issues, lackluster engines and transmissions were all ignored or given band-aids.

Various scenarios were floated, including an insane merger with General Motors, which was no better off than Chrysler. It was an idea that appealed only to those who stood to profit by it or think tanks that needed to encounter the real world more often. By the end of 2008, Chrysler sales were down 36.08% from 2001. GM’s sales were down 39.19% over the same period and Ford’s had fallen 49.33 percent. But Ford had money and Chrysler and GM didn’t. GM had waited too long to go to the capital markets and Cerberus wasn’t about to take on more debt to help Chrysler. So we got government intervention in the form of massive loans and heavy oversight. Cerberus lost Chrysler and GM’s stockholders lost everything. By the end of 2009, with a multi-month production shutdown, Chrysler sales were off 59.03% compared to 2001 while overall industry sales were down just 39.27 percent. To be fair, GM and Ford sales weren’t much better: Ford sales were down 57.08% and GM sales were down 57.24 percent. However, Ford sales were actually beginning to rebound. Ford’s 2008-2009 drop was just 15.31% compared to a decline of 29.67% at GM and 35.90% at Chrysler.

With the intervention, Chrysler did get a new lease on life. Time will tell if Americans will embrace Fiat but there’s an important difference between Fiat then and Fiat now: Fiat now has real distribution and support, not just dealers. Even more than some interesting ideas about materials engineering, Fiat’s Achilles Heel was support: there wasn’t any. However, Americans can embrace some vastly improved Chrysler, Dodge, Jeep and Ram vehicles and, with some renewed faith the company will be around, I think we’ll see more customers walking into dealer showrooms.

As I said at the beginning, 2010 was a bit of relief after the past few years. Chrysler showed it does have a future; talented engineers are being brought back; sales of the well-regarded Jeep Grand Cherokee are good; the new 200 and Avenger are getting reviews once not associated with Chrysler products; annual incentives spending is down and the people of Chrysler are talking again.

Incidentally, over the ten years from 2001-2010, Chrysler actually held on to more of its 2001 sales volume than General Motors, 47.4% compared to 45.84 percent. Something to think about next time some talking head gushes about GM.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.


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