Sales Thawed in March for Detroit's Big Three Automakers, but 1 Shattered the Ice With a Vengeance

Anxiety reached a tipping point, with automotive analysts and journalists, after vehicle sales in January and February checked in at a sluggish pace. Automakers held to their story, claiming that intense winter weather had kept traffic away from dealerships; but not everyone bought that excuse. Headlines questioned whether new-vehicle demand had peaked, rather than asking whether it simply was depressed by that severe weather. Consider those questions answered: As soon as the weather began to thaw in March, so did automotive sales.

Industry sales surged 6% in March, far ahead of forecasts. Further, the industry's seasonally adjusted annual rate of sales, or SAAR, surged beyond last year's 15.3 million mark to reach 16.4 million for one of the best monthly performances since the recession. March's performance was strong enough to make up for the weak sales during the first two months of 2014, and pushed first-quarter results above last year's. Here are some highlights from Detroit's Big Three automakers, and a look at what to watch during an important spring selling season.


Graph by author. Source: Automotive News DataCenter

Fiat Chrysler Automobiles (NASDAQOTH: FIATY  ) posted the largest sales increase of the Detroit automakers, with a 13% gain compared to last March -- its best March since 2007 -- for a total of 193,915 units. Chrysler's Jeep and Ram truck brands did the heavy lifting, with staggering sales increases of 47% and 26%, respectively. That was good enough for Jeep's best sales month of all time, and was the Ram truck's best March in a decade.

"We are entering the spring selling season on a high note as our Jeep and FIAT brands recorded their best sales months ever and Chrysler Group extended its streak in March to 48-consecutive months of year-over-year sales increases," said Reid Bigland, head of U.S. sales for the company, in a press release.

2014 Chevy Silverado finally picks up retail sales pace. Source: General Motors

General Motors' (NYSE: GM  )  sales were up 4% compared to last March, and reached 256,047 vehicles. As is the case with each of the Detroit automakers, full-size pickup sales are the bread and butter of profits, but sales in March were even more important for GM's Silverado and Sierra.

GM's two full-size pickups boast the freshest designs of the Detroit competitors, and the company's initial strategy was to let the fresh designs speak for themselves without incentives, enabling heftier profits. Unfortunately, that decision sent deliveries of the Silverado and Sierra spiraling downward 15% and 6%, respectively, for the first two months of the year.

GM had hoped to take advantage of a small window of opportunity before Ford's next-generation F-150 hits the market, but with that window of opportunity closing it decided to offer its steepest incentives to date on the redesigned Silverado and Sierra. Had those incentives failed to boost retail sales of the two trucks, it would have been a disaster. GM investors can breathe a sigh of relief -- retail sales of the Silverado and Sierra surged 14% and 23%, respectively, in March.  

Also, in broader terms, GM's incentive spending and average transaction prices, or ATPs, should enable the company to have a profitable sales mix. GM's ATPs increased $2,000 per unit from February, and more than $3,800 from March last year, enough to register a new ATP record of roughly $34,000 per vehicle. Further, GM's overall incentives as a percentage of ATPs were 10%, despite being increased on full-size trucks, which is lower than the industry average of 10.3%.

On the downside, March also brought a flurry of bad press for General Motors. It seems each day brings a new GM vehicle recall -- the latest one of 1.3 million vehicles, due to the potential for a sudden loss of electric power, brings the total count to eight separate recalls over the last six weeks, totaling nearly 6 million vehicles. Also, Congress has hinted at holding another hearing to question former GM executives regarding a possible cover up for failing to recall a faulty ignition part that is linked to at least 13 deaths in recent years. It's too soon to know if these recalls, and the company's possible dissembling, will have a negative effect on GM's vehicle sales. Investors would be wise to watch if GM's new-vehicle sales begin to fall behind the industry's pace through the important spring selling season. 

Ford Motor Company (NYSE: F  ) posted sales of 244,167 vehicles which was an increase of 3% over March last year. While the sales increase trailed those of its crosstown rivals, there were some excellent figures in Ford's data for investors to soak up. Let's start by looking at two of Ford's most popular vehicles: the Fusion and F-Series trucks. 

Ford's Fusion set an all-time monthly sales record in March with more than 32,963 units sold.  According to Ford, the Fusion continues to garner an ATP of $23,500, which is higher than the ATP of segment leader Toyota Camry, and near the top price of the entire segment. Another important line of vehicles that had a successful March is Ford's F-Series trucks, which experienced improved sales by 5% to nearly 71,000 vehicles. That sales performance is far ahead of what Ford considers a solid month of sales -- 50,000 vehicles -- and is only the fourth time that F-Series sales topped 70,000 units since the recession. Investors should be pleased that Ford's most profitable and largest volume model continues to sell well despite having the oldest design of all Detroit automakers' trucks.

In other good news, Ford's struggling Lincoln brand may finally be gaining traction in 2014 behind sales of the redesigned MKZ model. Sales of the luxury sedan surged 72% in March, compared to the same time last year; although, keep in mind that supply of the redesigned vehicle didn't fully arrive at dealerships until about April 2013. The Lincoln brand's overall sales are up 35% through the first quarter 2014, and 27% over the last six months. If the MKC is a hit when it arrives later this year at dealerships, then it should send Lincoln sales to a new level, and it would be a small boost to Ford's stock because a thriving luxury brand is a must-have in today's automotive industry.

Foolish takeaway
The industry increased its incentives in March to lure more traffic to dealerships, and it played out well -- both sales and transaction prices rose. One reason for the increase in dealer incentives is that Japanese brands typically boost discounts in March because it's the last month of their fiscal year and represents an opportunity for one last sales push. The key thing to watch going into April is whether or not the Japanese brands dial down their incentive strategies for the new fiscal year. With a weakened yen it would allow the Japanese automakers to weather the incentive storm more effectively, but a growing incentive war would be bad for all involved. If you're an investor in any automaker, keep an eye on incentive trends through the spring selling season.

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