honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Tuesday, January 3, 2006

2005 bad year for U.S. auto brands

By SARAH KARUSH
Associated Press

Chevrolet SUVs sit on the lot of a dealer in Arkansas. Summer discounts may have come back to hurt U.S. auto sales in December.

Associated Press library photo

spacer spacer

DETROIT — A lackluster December was expected to cap a dismal year for U.S. automakers, who saw Asian competitors eat away at their market share throughout 2005.

Analysts are forecasting a weaker month than December 2004, as the impact of traditional year-end deals was muted by deep discounts over the summer. Automakers are scheduled to report December results tomorrow.

Full-year sales were expected to be essentially flat, but with market share losses for the Big Three, whose best sellers — gas-guzzling trucks — fell out of favor.

General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group had a combined U.S. year-to-date market share of 57 percent at the end of November, down from 60 percent two years before.

Robert Barry, an analyst with Goldman Sachs, estimated their December market share at 54.5 percent, down from 58.1 percent last year.

Early numbers released mid-month indicated that sales got off to a slow start in December, traditionally a time of brisk sales thanks to year-end deals. U.S. sales were down 14 percent for the first 11 days of the month, according to the Power Information Network, a division of the marketing research and consulting firm, J.D. Power and Associates.

Though the pace picked up later, analysts John Murphy of Merrill Lynch and David Healy of Burnham Securities both predicted December sales would be 5 percent below year-ago levels.

GM, Ford and Chrysler saw sales soar to near-record levels last summer with discounts that let consumers pay the employee price. But sales plummeted as soon as the discounts expired in October.

"The programs were more about 'reallocating sales' than stimulating demand," Goldman Sachs analyst Robert Barry said in a research note.

The automakers returned to incentives at the end of the year, though, after the summer's deals, they had less effect than in previous years.

Analysts said the biggest change in 2005 was a shift toward cars and away from trucks.

"This shift has been especially prominent in (the) last four months as September's hurricanes and $3-per-gallon gasoline served as a turning point in consumer preference," Murphy noted, adding that if it continues, the trend could accelerate the market share loss of GM, Ford and Chrysler. The domestic Big Three rely on SUVs and other light trucks for the majority of their sales.

The Big Three are banking on new-vehicle introductions to stop the migration of customers to foreign competitors such as To-yota Motor Corp., Honda Motor Co. and Hyundai Motor Co. Healy said he expected GM, Ford and Chrysler to continue to lose market share in 2006, though at a far slower rate.

Higher short- and medium-term interest rates will make financing a car more expensive this year, but that's not likely to have a dramatic effect on vehicle sales given the strength of the economy, he said.