GM, Ford, Chrysler Report Double-Digit Sales Jumps
Drivers snapped up new models and rental-car and government fleets ordered more vehicles in May, boosting U.S. auto sales for yet another month.
It was a sign that automakers are benefiting from a fragile but improving economy. Consumers even shrugged off an 8 percent decline in the stock market in May.
Both Ford [F 11.69 0.28 (+2.45%) ] and General Motors saw double-digit sales increases over the same month last year, when GM was headed into bankruptcy protection and Chrysler Group was already there.
If the trend holds for other automakers, May would be the seventh straight month of year-over-year sales increases for the industry.
One key factor for automakers in May was the long Memorial Day weekend—a key selling period that can account for half of all sales for the month.
Paul Taylor, chief economist with the National Automobile Dealers Association, said good weather and a weak Memorial Day last year—which came just a day before GM filed for bankruptcy protection—helped make sales comparatively stronger during last weekend's holiday.
Ford's sales rose 22 percent, boosted by strong demand for the F-Series pickup and new Ford Mustang. Sales to rental, government and commercial fleets rose 32 percent.
But sales fell at Ford's Lincoln, Volvo and Mercury brands, with Mercury down 11 percent. The company is expected to announce later Wednesday that it's phasing out the mid-range brand. It has scheduled an afternoon conference call with Mercury dealers. Ford brand sales climbed 28 percent.
In other Ford news, people briefed on the matter say the company will announce Wednesday that it will phase out its Mercury brand.
Ford has scheduled a conference call with dealers and a press conference for late Wednesday afternoon.
The people say Ford plans to boost the Lincoln product lineup to give dealers more models to sell. The people did not want to be identified because the official announcement had not been made.
The fate of the 72-year-old Mercury brand has long been in question. Mercury sales peaked in 1978 at more than 580,000 vehicles but have been declining ever since. Ford sold more than 92,000 Mercurys last year.
GM, Chrysler Sales
GM's sales rose 17 percent, led by a 32 percent jump in sales of its four remaining brands -- Chevrolet, Buick, GMC and Cadillac. Those brands got a lift from strong new products, such as the Chevrolet Equinox midsize crossover, Chevrolet Camaro muscle car, and Buick LaCrosse sedan.
Fleet sales spiked to 38 percent of GM's sales. Those sales can hurt resale values and brand image, but the company said it expects to end the year with 25 percent of its sales to fleets.
And Chrysler posted a 33 percent sales increase in May of 2010 compared with May 2009, the company said Wednesday. Chrysler sold more than 100,000 units in U.S. for the first time since March 2009, reaching 104,819 units.
May marks the fourth consecutive month of month-over-month sales increases, and the second consecutive month of year-over-year sales increases. Chrysler, Dodge, Jeep and Ram brands all posted year-over-year sales increases.
Toyota Lags Behind
Toyota [TM 71.4686 -0.0514 (-0.07%)] says its May sales in the U.S. rose 7 percent on strong demand for its Lexus luxury brand, but the increase lagged behind rivals.
The Japanese automaker says Lexus sales jumped 31 percent due to a slate of generous incentives designed to spur sales following the recall of the GX 460 SUV. GX sales more than doubled during the month.
But sales of Toyota brand vehicles rose only 3.6 percent, while sales of some sedans like the Camry and the Avalon declined.
Toyota has been using heavy incentives on its Toyota brand cars and trucks to drum up sales after the company recalled millions of vehicles due to faulty accelerator pedals. But May's mixed results indicate the incentives could be losing their effectiveness.
And Nissan [NSANY 14.15 -0.06 (-0.42%) ]North America reported May 2010 sales of 83,764 units versus 67,489 units a year earlier, an increase of 24.1 percent, compared with May 2009. Nissan Division sales rose 24.1 percent for the month, while sales of Infiniti vehicles were 24.6 percent higher than a year before.
Consumers found that deals were slightly worse than in April. The average industry incentive was $2,603 per vehicle last month, down from $2,631 in April and $2,943 in May of last year.
Incentives are lower than in previous years because deep production cuts have left dealers with lean lots, making them less eager to cut prices, said Jesse Toprak, vice president of industry trends and analysis at auto pricing site TrueCar.com.
The outlook for auto sales through the summer appears rosy—provided the economy cooperates. The financial markets need to stabilize and employers need to start hiring at a faster clip for sales to continue climbing, said Paul Ballew, a former chief economist at GM who is now chief economist at insurance firm Nationwide.
"Big-ticket items get impacted by a choppy recovery," he said.
But several trends bode well for new car sales. Prices for used cars have been rising, which means consumers on the fence between a used and new car are more likely to buy new, Taylor said.
In addition, gas prices remain steady, home prices have started to stabilize and consumers are becoming more eager to replace their aging vehicles .
"That free fall of home equity that consumers were looking at has stopped in most markets across the country, and that's important," he said.
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