Rising Detroit sales tide lifts rival carmakers

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Detroit's big three "employee-discount" programs were successful in driving traffic to dealer showrooms-for Hyundai.

Bob Cosmai, president-CEO of Hyundai Motor America, said that when the automaker releases its July U.S. sales this week, they will likely top the brand's June monthly record of 43,000 units and hit a new monthly peak. And Jed Connelly, senior VP-sales and marketing of Nissan North America, said both the Nissan and Infiniti brands in June scored the second best monthly profits for dealers in their U.S. history and that July may set new dealers' profit records.

Detroit "stirred up the whole market," said Kia Motors America President Peter Butterfield. "We benefit when the market is humming."

The omnipresent advertising programs from General Motors Corp., Ford Motor Co. and Chrysler Group encouraged potential buyers to check out industry deals, and that prompted comparison shopping among imports. The result was a lift in showroom traffic for virtually all brands last month, said analyst John Casesa of Merrill Lynch. He noted that July will mark the automotive category's highest seasonal selling rate since October 2001.

Yet Mr. Casesa projected that Ford and GM's big sell-down will result in combined pre-tax losses of $4.4 billion in the second half, although they could also result in increased production from the two companies for the first time in nearly three years.

While some imports may have benefited, the big sales winners were inevitably the Big 3. "Most imports will do OK in July, but they are not going to enjoy the same increases as the domestics," Mr. Cosmai predicted.

Indeed, Jim Sanfilippo, exec VP of Omnicom's auto consultant AMCI, said June was the first month in a long time that Toyota didn't grow its market share. And in the lucrative luxury segment, GM's Cadillac brand outsold Toyota's Lexus brand in June by some 3,000 units.

FORD JUMPS

Independent auto Web site Edmunds.com predicted that among Detroit's Big Three, Ford will see the biggest jump, 41%, in U.S. vehicle sales in July 2005 vs. July '04. Edmunds.com projected a 27% July-over-July jump for Chrysler but just 10% for GM, since it had fewer '05 models left to sell in July. Edmunds projected the industry will sell a total of 1.72 million cars and trucks in July, 11% more than last July.

Among Japan's top three transplant carmakers, both Toyota Motor Sales USA and American Honda Motor Co. will see vehicle sales drop by 1% in the July-over-July comparisons, while Nissan North America's July sales will rise by 2% vs. a year ago, predicted Edmunds. But Edmunds expects all three carmakers to see slight jumps in vehicle sales from June 2005 to July 2005, with smaller Japanese brands taking some hits.

"In June and July, the large Japanese car companies lost share but not sales," said Tom Libby, director of a unit of J.D. Power and Associates. He said Detroit carmakers "are expanding the overall market, which is lowering the Japanese companies' shares."

NEXT MOVE

Now the auto industry is waiting for GM's next move. The country's leading automaker ends its employee discounts today, and will announce its new value pricing plan for 2006 models.

"If GM goes back to heavy rebates, then it has learned nothing," said Mr. Sanfilippo. "With this [employee] pricing, GM drove the fight to their home court and gained home-court advantage." He predicted Ford and Chrysler will extend their employee discounts through August to clear out remaining 2005 models.

But a new survey of adults who plan to buy or lease a new vehicle in the next year could prove troubling to GM. Of 2,000 Americans surveyed in June via Harris Interactive and Kelley Blue Book, 51% said they aren't likely to buy a car without incentives. That's up from 44% eight months ago and the highest it has been since the question was first asked in December 2003. Moreover, 71% said the availability of new-vehicle incentives affects the timing of their vehicle purchase.

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