GM's a Big Loser as Toyota Rebounds

So much for concerns about auto sales: U.S. sales of cars and light trucks (pickups and SUVs) were up 11% in January over year-ago numbers, a strong result that suggests economic momentum is increasing.

That result was good enough to put the annualized sales pace at 14.1 million, the highest monthly mark posted since the "Cash for Clunkers"-fueled sales boomlet in August of 2009.

Buried in the numbers are several trends worth noting, starting with a big one: After two years of troubles, Toyota (NYSE: TM  ) is finally starting to roar back -- and General Motors (NYSE: GM  ) has already lost some ground.

A troubling note for GM
GM's sales were down 6% over (admittedly strong) year-ago figures, and that was despite an unusually hefty proportion of fleet sales, which made up 30% of the company's total for the month.

That's an eyebrow-raiser. Low-margin fleet sales were a bane of bad old Detroit, when the Big Three used them as a crutch to keep production high as consumer interest in their products waned. That history means that any jump in Detroit's fleet numbers (and this was a jump; an average around 25% has been more typical recently, and is regarded as healthy) is going to be viewed skeptically by analysts.

But this jump shouldn't be cause for too much concern yet: As Edmunds analyst Michelle Krebs points out, January is typically a high month for fleet sales. Ford's (NYSE: F  ) fleet numbers for the month were unusually high as well, though the Blue Oval managed an overall sales gain for the month. And GM executives, like their Ford counterparts, did say that they expect that percentage to fall back to normal ranges in coming months.

But it's a telling sign that the General posted a sales decline despite the fleet-sales cushion. Sales of both Buick and Cadillac brand vehicles were off sharply, as both brands are waiting on fresh products. Chevy did better, with good results driven by strong sales of one of GM's best new cars, the Cruze compact, and one of its golden-oldies, the big Suburban SUV. The Camaro, another of GM's more recent offerings, also saw strong sales on the month.

Expect that to be a theme in coming months. GM's efforts to overhaul its product line came to a crashing halt during the company's downward spiral, and it lost substantial ground to competitors like Ford who were able to continue investing in new product programs during the downturn. GM is now moving aggressively to make up for lost time, but it takes time to develop new vehicles -- quite a lot of time. Approximately 30 months or so is typical for a new-car program, and much of GM's pre-bankruptcy work had to be torn up and restarted from scratch, as the competitive landscape had shifted in the interim.

GM's new cars and trucks are coming, and signs so far suggest that they'll be quite competitive. But they won't be rolling out in quantity until 2013 and 2014. In the interim, strong competitors will be able to gain sales ground against the general.

Strong competitors, for instance, like Toyota.

Godzilla's back, and boy is he mad
There was never any question that Toyota was going to be very aggressive in winning back lost market share once the company got its production issues straightened out, and January saw the beginnings of that effort. Toyota's sales were up 7.5% on the month, a result comparable to Ford's, but driven by somewhat different segments of the market.

While Ford saw success with its compact Focus and small SUVs, Toyota posted an eye-popping year-over-year gain of almost 56% for its perennial class-leading Camry, and a 79% gain for its big Avalon sedan. Prius sales were solid, too, up almost 9%, but sales of the compact Corolla were down significantly. The Corolla sales may be decreasing due in part to continuing inventory challenges during the first part of the month, and possibly due to the strength of the smaller Yaris, which posted a 64% gain over low year-ago numbers.

Honda (NYSE: HMC  ) also posted a solid gain on the month -- just shy of 9% -- as it continued to try to get its own supply lines back to something like normal. Its pace was led by big gains for the Civic compact, continuing the theme seen at Ford -- but it was also something of a surprise, as the current Civic has been widely panned by reviewers.

The upshot: Now it gets complicated
2012 is already shaping up as a rough battle for market share. Spending on "incentives" -- those cash-back and zero-percent financing deals funded by automakers to juice sales -- could rise sharply as the battle heats up. Toyota has already signaled that they will spend heavily to regain lost share, and the other automakers may be forced to spend to keep up.

A price war won't help anyone's margins, of course, and with the big global automakers already squeezed by difficult economic conditions overseas, a reduction in U.S. profits could hurt. Is that where things are going? Keep an eye on this space.

Strong U.S. sales will help Ford sustain and increase its dividend, which is due to reappear in March. But you don't have to wait until March to put the power of reinvested dividends to work in your portfolio. In a special new report, Motley Fool analysts have identified "11 rock-solid dividend stocks," all great additions to a long-term investor's portfolio. This new report is completely free for Fool readers, but only for a limited time, so get instant access now.

Fool contributor John Rosevear owns shares of Ford and General Motors. You can follow his auto-related musings on Twitter, where he goes by @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors, as well as creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 05, 2012, at 2:01 PM, Milligram46 wrote:

    Hey John, some more info for you.

    In 2011 the fleet queen leader was ... Ford. Surprise! About 33% of all Ford sales went to fleet, and their total marketshare when weeding out fleet sales actually declined.

    General Motors saw fleet sales drop below 25% for the first time in, well forever.

    The Ford Focus appears to be teetering on a disaster with Ford, leading Ford's fleet sales at 45%. Yup, 45% of Focii went to fleet. Inventory on the Fiesta is 123 days. Total sales of the Fiesta, which sold for almost all of 2011 was 68K units. In comparison the new comer Sonic, living off the legacy of the God awful Aveo, available for only three months, sold 44K units.

    To put things into a better perspective, Ford did more in fleet in 2011 than Chrysler/Fiat. YIKES!

    To provide some baseline...

    Honda - about 4% fleet

    Hyundai/Kia - about 10% fleet

    Toyota - about 13% fleet

    Nissan - about 17% fleet

    General Motors - about 24% fleet

    Ford - about 33% fleet

    Those are the ones I have numbers on.

    The bigger issues that General Motors has right now are more bumps that are getting read to get addressed.

    1) Malibu is oldest midsizer in the competition, and has not aged well - new one can't come fast enough - and is coming in a few months

    2) Cadillac only has one sedan right now, the CTS. ATS and a new flagship can't come fast enough.

    3) Buick is still building out is product line with four models, one with very limited availability. HOWEVER - Buick did incredibly well with just 3-1/2 models in 2011 when compared to say Lexus or Acura.

    4) GMT900 for the Silverado, Sierra, Yukon, Suburban, Tahoe, Escalade, and Avalanche are the oldest platform for trucks out there. The update can't come fast enough (although the platform has aged very well and MPG is admirable)

    5) Cruze sales are slowing down. The diesel variant can't get here fast enough, GM should ditch the awful 1.8L 4-banger, and hello, sell the damn hatchback!

    6) The Volt non-fire issue witch hunt sure didn't help at all. Reputation is damaged on what wasn't a real problem. However, Volt has other issues and in the end, I don't consider it a failure. Any customer who walks into a showroom to look at a Volt, and drives away in a Cruze Eco is a win for GM.

    I don't see huge glaring issues in the rebuilding plan - other than slowing Cruze sales being of concern. There is no denying that the Corolla is a the bottom of the pile in the segment, the Civic is toward the bottom of the pile. Those two vehicles are relying on spawning salmon returning to the showroom. They are no longer mileage, value, technology, comfort, ride, handling, etc. etc. leaders. They have the brand. Hyundai, Kia, VW, Ford, General Motors, Mazda, and when the Dodge Dart gets here Dodge - are all doing it better in the segment. However I think it is a blood bath in the segment with everyone fighting for share.

    The new Camry addressed a lot of the issues with the 2008 - 2011 offering. But the refreshed 2011 Corolla is a disaster of a car as is the Civic. The sales are stunning given how awful the Corolla is in particular.

  • Report this Comment On February 06, 2012, at 8:43 AM, TMFMarlowe wrote:

    The Focus may be too expensive; I've wondered that for a while. There's *nothing* wrong with the car itself; it's excellent, best in class from my perspective. Ford just needs to figure out how to get more Civic/Corolla intenders to try one.

    Corolla sales numbers in January may have been affected by supply; I think we need to see how they look in Feb before jumping to conclusions about the refresh.

    I'm kinda shocked by Civic's numbers. The Focus (and Cruze, and Elantra) are so much better that it's shameful. I'm not willing to pronounce the Dart a winner until I get some seat time in one, but I'll say it looks good. I'm also shocked by the Yaris numbers... something weird is going on there, because that car really doesn't have much going for it compared to Fiesta, Sonic, and Fit (still Honda's best model).

    Cruze was bound to slip once the Japanese got their collective acts together. No worries. And as I've been saying for months, GM's biggest issue is that it needs all of its upcoming new products yesterday, but some (trucks, the Cadillac flagship) are still a long way off.

    John Rosevear

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1773043, ~/Articles/ArticleHandler.aspx, 9/30/2014 6:08:01 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement