Ford trucksRICK WILKING
A surge in December sales for some major auto makers signalled the industry is putting a brutal year behind it, but few predict a return to the heyday of the past decade any time soon.
The gains last month in both the U.S. and Canadian markets provide some evidence that the industry is starting to claw back from the worst sales levels since 1982 in the United States and the worst Canadian performance since 1998. But a return to the glory days of most of the 2000s is not in the cards for several years, analysts say.
Nor is the recovery of the next few years expected to be hugely profitable for auto makers, because the market is shifting to smaller vehicles such as compact cars and subcompacts, which generate much smaller profits than the behemoth sport utility vehicles of the 1990s.
On the positive side of the ledger in December, incentives fell in the U.S. market, sales rose for Ford Motor Co. and Toyota Motor Corp., and they fell only 4 per cent for Chrysler Group LLC, representing one of its better monthly performances of the year. Sales rose in Canada from year-earlier levels, the only month in 2009 that that happened.
Those positive indicators were overshadowed by the annual figures showing that General Motors Co.'s U.S. sales plunged 30 per cent and Canadian sales 29 per cent, and Chrysler's performance in the United States was its worst showing since 1962.
While several auto makers are forecasting an improvement this year from the recession levels of 2009, Ford dialled back its forecast for total U.S. vehicle sales to a range of 11.5 million to 12 million. While that's about a 10-per-cent increase from the 10.4 million sales in 2009, it's a downgrade from a July forecast that Americans would buy 12.3 million light vehicles this year.
Nonetheless, Merrill Lynch & Co. Inc. analyst John Murphy forecast Tuesday that North American production will rise by one million vehicles this year and next. That led him to boost his forecast for Magna International Inc. profit and his target price for the company's shares.
Production increases are already in the works at some key Canadian auto plants such as Cami Automotive Inc. in Ingersoll, Ont., and Toyota Motor Manufacturing Canada Inc. in Woodstock, Ont., which should give a boost to the beleaguered auto parts and manufacturing sector in Canada's manufacturing heartland of Southern Ontario.
Sales began collapsing in 2008, as the credit crisis hit. U.S. sales fell to 13.4 million that year, compared with nine successive years in excess of 16 million and a high of 17.7 million in 2000.
"For 2010 I'm leaving my seat belt on because I think that volatility is still part of the new norm," said Ken Czubay, vice-president of marketing for Ford Motor Co., who noted how sales swung from depths in the early part of the year to big increases during the summer when the U.S. government brought in its cash-for-clunkers program that encouraged Americans to sell their older vehicles and buy new ones.
Mike DiGiovani, GM's top sales analyst, offered some muted optimism for 2010, forecasting sales of between 11 million and 12 million this year.
Canadians bought 1.46 million cars and trucks last year, down 11 per cent from 1.635 million in 2008. A December gain of 18 per cent helped.
"December sales were very respectable, all things considered," said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. of Richmond Hill, Ont. But he noted that even that increase is comparable to sales of six to seven years ago and "there still is a very long way to go before we see mid-decade levels of sales."
Mr. DesRosiers is predicting sales of 1.5 million in Canada this year.
The big winners in Canada were Hyundai Auto Canada Corp., Kia Motors Canada, Audi, Mercedes-Benz Canada Inc. and Subaru Canada Inc. Among the top five sellers in Canada, only Ford Motor Co. of Canada Ltd. was in positive territory with a 7 per cent rise.
Sales slumped 27 per cent for Chrysler Canada Inc., while Honda tumbled 18 per cent and Toyota slipped 8 per cent.
Mr. Murphy of Merrill Lynch said the production increase will be driven by a need to boost inventories, rather than a big rise in sales.
"Although some supply constraint is desirable for maintaining pricing discipline, the U.S. auto industry is still at a point where inventory in some cases is too lean to meet an improving demand environment," he noted.
"In November, the total U.S. light vehicle inventory stood at just 2.0 million units, which is among the lowest absolute levels seen since the '70s."
With files from Associated Press