US incentives arrest sales slide in July

THE fragile green shoots of auto industry recovery were evident in the United States last month as Ford managed a rare sales gain and arch rival General Motors announced plans to ramp up production by 35 per cent in the third quarter.

Fuelled by the new “cash-for-clunkers” incentive scheme introduced by the US government in the last week of July, the US new-vehicle sales slide eased as the industry recorded a 12 per cent decline on July last year – the lowest fall since May 2008.

The figures raised hopes that the industry might have seen the worst of the 27-year lows experienced this year.

Ford – the only “big three” US car-maker not to file for Chapter 11 bankruptcy – welcomed back buyers into its showrooms in increasing numbers, lifting sales by 2.4 per cent in July to 164,795 units – more than 4000 vehicles above last year’s levels.

By contrast, GM sales declined 19.4 per cent, Chrysler was down 9.4 per cent, Toyota slipped 11.4 per cent and Honda slid 17.3 per cent.

Despite its sales hit, GM remained the market leader on 188,156 units, ahead of Toyota (174,872, including Lexus) and Ford.

Left: US Ford Escape Hybrid. Below: US Ford Ranger.

Ford’s July sales increase was driven by the strength of its smaller vehicles, especially the Focus (up 44 per cent on July 2008) and Fusion (up 66 per cent).

These vehicles tapped into the low-end sales explosion triggered by government sales incentives of up to $4500 for buyers trading gas-guzzlers on more fuel-efficient car and trucks.

Automotive News reported that sales of the Ford Escape small SUV – which includes a hybrid version – almost doubled, while volumes of the Ford Ranger small pick-up climbed 65 per cent.

However, Ford warned that the economy was not strong enough to sustain the bull run in the showrooms, at least not until economic recovery begins to kick in at the end of the year.

After just six weeks, the cash-for-clunkers scheme has already exhausted the $US1 billion allotted by the US congress, which is now considering finding $2 billion more to extend the scheme.

Regardless, GM is sufficiently confident of the embryonic recovery to expand production by 35 per cent this quarter over the depressed levels of the second quarter when it was battling Chapter 11 bankruptcy.

The 535,000 vehicles it plans to build this quarter is still 42 per cent down on the 915,000 built in the same quarter last year, but well up on the 395,000 vehicles made in the second quarter and 371,000 vehicles in the first quarter.

GM has cut its stock inventory from 82 days to 76 days, according to Automotive News, giving it confidence to step up its manufacturing pace.

Of the importers in the US, Hyundai and its subsidiary Kia continue to kick goals, with combined sales increasing nine per cent month-on-month as the Koreans take advantage of the cash-for-clunker bonuses.

Combined, Hyundai and Kia have now leapfrogged Nissan, whose sales in the US are down 32 per cent this year.

Subaru is also on the climb in the US, with July sales up a whopping 34 per cent on July 2008. It is one of the few sizeable players to record a year-to-date gain, up 4.3 per cent.

American Mitsubishi sales, on the other hand, have halved this year. In July, it sold just 4847 units, compared with 9644 for the month last year.