Toyota's September Sales Rally

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Analyzing monthly sales reports from U.S. automakers these days tends to be a scavenging expedition. Overshadowed by multibillion losses, falling market shares, boardroom dramas, and shaky restructuring efforts, any good news in Detroit is buried deep.



September was no different. The Big Three's overall performance looked poor next to Toyota's (TM) turbocharged numbers. But if there is a consolation for General Motors (GM), Ford (F), and DaimlerChrysler's (DCX) Chrysler Div., it's that Toyota seems to be in a class by itself. Honda (HMC), Nissan (NSANY), Hyundai, and other Asians have hit sales headwinds.



GM reported September sales were off 3.1%, while Ford posted a 5% gain, and Chrysler turned in a 4% decline. Toyota, meanwhile, posted a 25% gain from a year ago. Honda sales were off 8%, while Nissan sales were down 9.2%.



FORD'S SEDAN SAVE.

Now for the silver lining: GM and Ford, in particular, are out to emphasize that they are increasing their retail sales to consumers, while trying to decrease sales to rental fleets. These fleet sales are typically unprofitable and can hurt the residual value of vehicles. Ford reported that its retail sales were up 6%, while GM said its retail deliveries were up less than 1%. Chrysler does not separate its retail and fleet sales.



With three-fourths of the year behind it, Ford's problems can be analyzed by looking at its sales, model by model. Ford is hurt these days by declining sales of vehicles that management botched in the past four to five years, either with poor design or confused marketing messages. The Ford Five Hundred, Mercury Montego, Ford Freestyle, and Ford Ranger, for example, are all down, and fall into the category of botched design, neglect, or misguided ad campaigns.



But Ford's trio of sedans -- Ford Fusion, Mercury Milan, and Lincoln MKZ -- which management points to as the beginning of the company's recovery -- are selling well. As Ford launches the Ford Edge and Lincoln MKX crossovers in the next few months, the company is hopeful that it can capture Ford customers deserting once-popular sport-utility vehicles like Explorer and Expedition into the now more popular, lighter crossover SUVs. "If there is one vehicle we have to get right this year, it's the Edge," Mark Fields, Ford's president of the Americas, said recently.



GM'S SUPPLY SIDE.

Ford's overall sales picture will probably look bleak for the next couple of months and into next year because it is reducing its sales to fleets. The venerable Ford Taurus, for example, gets retired at the end of October. The Taurus, which has been selling exclusively to fleets, will be Ford's top-selling passenger car this year, at around 150,000. In September, Ford sold almost 23,000 Tauruses, 65% more than a year ago, as fleet customers bought up the last of the run. "It will make for tough comparisons, but we have to concentrate on sales to consumers that are profitable," says Ford's chief sales analyst, George Pipas.



Meantime, an analysis of GM's model-by-model sales shows that while Buick, Pontiac, Chevrolet, GMC, and Cadillac were all down, retail sales were up in September by about 1,400 vehicles and would have been even higher, except that the company was limited in its supply of passenger cars in demand, namely the Chevy Aveo, Cobalt, and Malibu. Sales to daily rental companies were down 26% in September compared to year-ago levels. Its overall sales are down 11% on the year. And GM said it will reduce its fourth-quarter production to avoid having more vehicles than it can sell without heavy incentives.



GM's sales, and the fact that it has increased incentive spending the last two months -- GM's chief sales analyst Paul Ballew said incentive spending is now about $800 below last year, compared with about $1,000 below last year's level through July -- is not expected to have any material effect on GM's discussions with Renault-Nissan about a proposed alliance between the three automakers. GM board member Jerome York, who represents dissident shareholder Kirk Kerkorian, has been trying to pressure GM CEO G. Richard Wagoner Jr. and the GM board to pursue an alliance with Renault-Nissan on the grounds that GM's turnaround under Wagoner is not progressing fast enough.



TOYOTA'S TOUGH TRUCKS.

The Big Three have been trying to reduce their dependence on gaudy sales incentives by lowering sticker prices. But Ford, facing much tougher competition from GM's new redesigned pickup and an all-new Toyota Tundra, launched an incentive campaign around its F-Series pickup. The Ford "Truck Month" incentive campaign includes 0% financing deals for 60 months on all of the automaker's 2006 pickups in stock, including the popular F-Series lineup and many other 2006 model-year vehicles. Ballew said GM was not answering Ford with a new incentive plan. "We're not going to follow into every rat hole there is," said Ballew.



Chrysler, reeling from having to announce a big production cut and expecting a projected $1.5 billion loss this year, reported a sales drop of 4%, as sales of its SUVs continue to languish. Chrysler is even more dependent on trucks and SUVs in its lineup than GM or Ford. There was some good news for Chrysler: healthy sales increases for Chrysler Pacifica, the Chrysler Town & Country minivan, and good initial sales of the new Dodge Caliber and Jeep Compass. But sales have fallen off a bit for the wildly successful Chrysler 300.



Toyota saw a healthy increase in truck and SUV sales, as well as in cars, as it increased incentives on its truck products and has a successful new vehicle in the FJ sporty SUV. Toyota light trucks were up 36% in September, boosted by 5,500 FJ Cruiser sales. Tundra pickup sales were up 65% as the company cleared out old Tundras to make room for its redesigned pickup.



GM, Ford, and Chrysler will have to clear out more of their older models that represent mistakes, and launch more of the newer models they believe represent the future before sales figures start to look better month to month. But even as they do, it's not as if Toyota is standing still. And Nissan, which has had a tough year, is about to launch a series of new vehicles. One thing is for sure: It's going to get tougher for Detroit before it gets much better.