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Foreign and Domestic OEMs Predicted to Wage 'Battle'

Foreign and Domestic OEMs Predicted to Wage 'Battle' in 2012

Just a few years ago the nation watched as Chrysler and General Motors struggled to survive, while Ford appeared to leverage itself to the hilt to stick it out. However, turn forward a few years and 2011 paints a very different story for the Big 3. With OEMs consistently releasing high sales numbers to cap off 2011, the Big 3's success, in particular, may have contributed to a 10-percent increase in automotive sales for the U.S. this past December.

Holding a "key inventory advantage," GM, Ford and Chrysler's sales success helped boost the nation's new car and light truck sales to ring in the new year, according to the National Automobile Dealers Association.

Paul Taylor, NADA economist, said Wednesday, "The Detroit 3 dealers had nearly 50 percent of the inventory available for sale during December and collectively enjoyed sales increases of more than 12 percent for the month.

"The inventory advantage for manufacturers based in North America will provide sales momentum during the first quarter of 2012," he continued.

And NADA is not the only one who has voiced positive predictions for 2012.

After noting that it appears that the December U.S. light vehicle SAAR will be in the mid 13 million unit range, KeyBanc Capital Markets officials revealed that this high number bodes well for the coming year.

"As a result of December's results, fourth-quarter 2011 has delivered the best quarter of 2011 with SAAR in the low to mid 13 million units (1Q11 of 13.0 million, 2Q11 of 12.1 million, and 3Q11 of 12.5 million). We are encouraged by these results, which, coupled with high average vehicle age, recovering Japanese inventory and slowly improving economic fundamentals, lead us to be increasingly confident that 2012 U.S. auto sales should continue to grow," Keybanc officials surmised.

Keybanc also went on to note that the Big 3's sales success should also encourage investors' outlook on the automotive industry as a whole for the coming year.

Reason for "Praise"

So what spurred both the NADA and Keybanc's praise for the Detroit automakers?

Starting with the Blue Oval, Ford's U.S. sales rose 17 percent last month, selling 201,737 units.

And as for its best-selling series, Ford sold 68,278 F-Series pickups in December, according to the company's statement, revealing its best December sales results since 2006.

Furthermore, total Ford sales for the year increased to 2,148,806 vehicles, rising 11 percent for the year.

Commenting on the news, Ken Czubay, Ford vice president, said, "The year finished on a high note, with industry sales momentum strengthening as the year came to a close.

"We saw Ford sales strengthen as well, posting our best December retail sales month since 2005 and closing the year as America's best-selling brand," he added in a statement.

And as for Chrysler, under Sergio Marchionne's leadership, the OEM reported its U.S. sales in December rose 37 percent year-over-year.

This marks the best month for the automaker since May 2008. And for the year, Chrysler Group sales totaled 1.37 million units, marking a 26 percent rise compared with 2012.

"Chrysler Group finished a year of growth on a strong note with our December retail sales soaring 45 percent to our highest dealer retail sales in four years," said Reid Bigland, president and chief executive officer – Dodge Brand and head of U.S. Sales, in a statement.

Lastly, GM reported sales rose 5 percent this past month year-over-year, selling 234,351 units.

Sales for the calendar year rose 14 percent year-over-year, rising to more than 2.5 million units, company officials shared.

"GM's balanced portfolio of fuel-efficient cars, trucks and crossovers helped us make the most of the U.S. economy's slow but steady recovery in 2011," Don Johnson, VP, U.S. Sales Operations, said in the company's report.

"Importantly, we were able to grow all four of our brands and reestablish Chevrolet as a force to be reckoned with in the passenger car business. This gives us a very solid foundation to compete in a market that we expect to keep growing," he added.

A New Year for Foreign OEMs

European OEMs have struggled recently due to the stagnant economic growth in Europe as a result of the sovereign debt and banking crisis, and Asian automakers are still trying to recover from this past year's natural disasters in Japan and Thailand.

That said, according to the recently released sales reports from foreign automakers, some appear to be gaining ground and starting the new year off on the right foot — and they may be searching for ways to better compete with the Big 3 brands, NADA's Taylor predicted.

Taylor expects automakers in Asia and Europe to "focus on the growing U.S. light vehicle market by accelerating their efforts to rebuild inventories of cars and light trucks at U.S. dealerships."

Further explaining his point, Taylor noted that the foreign OEMs are staged to take advantage of the aging population of light vehicles in the U.S.

"Looking ahead, aging light vehicles currently on the road at more than 10.7 years old, affordable credit and added incentives from manufacturers struggling to regain market share will drive stronger light vehicle sales as 2012 unfolds," Taylor said.

"Interest rates remain at historic lows, and cash incentives are likely to be a part of several automaker efforts to regain market share," he continued.

According to the sales results from the end of 2011, Asia and Europe's manufacturers are already gaining ground.

Even some of those those affected by the earthquake in Japan and the recent flooding in Thailand seem to be set to get back on track.

Nissan, who had to adjust production due to the proximity of some of its plants to the areas affected by the Thai floods, reported its North American arm's December U.S. sales were up 7.7 percent at 100,927 units, versus 93,730 units a year earlier.

And Nissan North America has also finished the calendar year with 2011 sales totaling 1,042,534 units, with the Nissan Division seeing a record year with sales of 944,073 units and Infiniti closing the year with 98,461 deliveries, the company reported.

"Although 2011 had some unique challenges stemming from natural disasters in Japan and Thailand and uncertain economic conditions around the globe, Nissan managed the crisis better than most, allowing our lineup to gain momentum throughout the year," said Al Castignetti, VP and general manager, Nissan Sales.

"Strong consumer demand for vehicles like the Altima, Rogue, Versa and LEAF helped propel us to a record 2011. With new core Nissan models on the way, we expect 2012 to be even better," he added in a statement.

But some of Nissan's counterparts did not fair so well.

As for Honda and Toyota, both also affected by 2011's natural disasters, the automakers were plagued by sales decreases and flat numbers at the end of this past year.

Toyota Motor Sales U.S.A. reported Wednesday that December 2011 sales results of 178,131 units was flat compared to the same period last year on a daily selling rate basis and raw volume basis. And for the full year, TMS reported annual sales of 1,644,661 vehicles, down 7.0 percent from the same period in 2010.

The company attributed the decrease to inventory shortages due to the earthquake and tsunami in Japan.

And Honda faired even worse. American Honda Motor Co. reported December monthly new-vehicle sales of 105,230, a decrease of 18.8 percent on a daily selling-rate basis.

Furthermore, American Honda's 2011 annual vehicle sales totaled 1,147,285, a decrease of 7.1 percent compared to 2010, the company reported.

On the other hand, as Korean vehicles continue to gain popularity among consumers, one OEM announced double-digit sales increases while wrapping up the year.

Hyundai Motor America announced sales of 50,765 vehicles in December, a 13 percent total sales increase and 18 percent retail sales increase compared with the same record-setting period a year ago.

And for the year, Hyundai sales were up 20 percent versus 2010, with sales to retail customers up 29 percent.

"We are encouraged by the present market fundamentals combined with consistent signals including brisk holiday selling that indicates a broader industry recovery," said Dave Zuchowski, Hyundai Motor America's executive VP of national sales, in a statement.

"We finished 2011 with solid momentum and much improved inventory levels and are enthusiastic about our prospects for 2012 as we continue to launch a broad array of new product entries," he added.

And other industry experts have taken note of the Korean automaker's success, as well.

In a recent analysis, Edmunds.com senior analyst Michelle Krebs said, "Kia is fast closing in on the half-million a year sales mark. Every new model introduced, with the Optima as the best example, have been hits. The quirky little Soul has left the rest of the 'box cars' in its dust. The Soul demonstrates that a solid, value-packed product plus attention-grabbing advertising — dancing hamsters — is a winning combination."

Volkswagen Continues to Scratch Out Bigger U.S. Market Share

One European automaker, in particular, has defied a rough economy to scratch out a 26.3 percent increase in U.S. sales for 2011, compared to the sales rate of 2010.

And Volkswagen of America reported 324,402 units sold in 2011, a 26.3 percent increase over prior year sales. And December sales totaled 32,502, up 36.2 percent over 2010.

Interestingly, this marks the best December for the automaker since 1972.

"December capped off a successful year of growth for Volkswagen of America," said Jonathan Browning, president and CEO of Volkswagen Group of America.

"In addition to strong sales performance, in 2011 we opened an award-winning manufacturing facility in Chattanooga, Tenn., launched the all-new Beetle and Passat , which won the 2012 Motor Trend Car of the Year, and the brand made the biggest improvement in sales satisfaction in the industry. We look forward to carrying this momentum into 2012," he continued.

NADA economists also made note of VW's sales success, which is due in part to its redesigned 2012 models — the new 2012 Passat and 2012 Beetle.

NADA: Positive Predictions for 2012

NADA economists cited the improving U.S. economy as reasoning for its positive sales predictions for 2012.

Chief economist Taylor predicts more than 13.9 million new cars and light trucks will be purchased or leased in 2012.

He also referenced three "key factors" for the predicted sales increase: aging vehicles, affordable credit and aggressive incentives.

He also noted that pent-up demand in the marketplace will force more consumers onto dealers' lots.

"With the age of cars and trucks on the road today at nearly 11 years, consumers can no longer delay making a purchase of a new or newer vehicle," he explained.

Moreover, Taylor claims that the availability of affordable credit from competing lending sources for auto loans will also contribute to the high sales rate.

"Interest rates on new car loans will remain historically low in 2012, due in part to policy decisions by the Federal Reserve Board to keep rates low and the U.S. economy growing," Taylor surmised.

"As a result, affordable credit will be widely available in 2012 with more automaker finance companies offering low-interest and interest-free loans for up to 60 months," he continued.

Lastly, Taylor predicts that both domestic and international automakers will "wage an aggressive battle" in an effort to capture U.S. market share in 2012.

Taylor explained that the automakers will compete by rebuilding a diverse selection of vehicle inventory at dealerships, ranging from cars and CUVs to truck-based SUVs.

A decline in gasoline prices will also result in car buyers considering a wider range of vehicles in different segments, he added.

"Auto sales typically increase with the exposure given to new vehicles during the auto show season in the first quarter and beyond," Taylor said.

"Lower vehicle costs for car buyers through manufacturer incentives and rebates combined with low interest rates will support stronger sales in 2012. And higher prices on used vehicles mean higher trade-in prices when shopping for a new car or truck," he concluded.