Despite Glom and Doom - U.S. Auto Sales Saw Gains in 2005

"Business"

01/05/2006

A Different Story for Ford and GM

By GREG KEENAN
The Globe and Mail (Canada)

Thursday, January 5, 2006

For all the gloom enveloping the auto industry amid high gas prices and plunging sales of sport utility vehicles, 2005 turned out to be a pretty good year in North America—except for Ford Motor Co. and General Motors Corp.

Annual vehicle sales in Canada and the United States were among the highest on record, although the troubles in Detroit dominated the year.

“It was an incredibly good year; surprisingly good,” said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. of Richmond Hill, Ont.

The high value of the Canadian dollar gave auto makers leeway to offer healthy incentives in Canada, Mr. DesRosiers said, and sales were also given a boost by the healthy Canadian economy and strong job growth last year.

Sales in Canada jumped 3.2 per cent, which was the third-best year on record.

Canadians decorated their driveways with 1.583 million new cars, trucks, minivans and sport utility vehicles last year, a number that has been surpassed only in 2003 and 2002.

Ford’s U.S. sales slid 5 per cent while GM’s tumbled 4 per cent. The one bright spot for the Motor City was the Chrysler division of DaimlerChrysler AG, where sales jumped 5 per cent.

Other auto makers, such as BMW AG, Honda Motor Co. Ltd. and Toyota Motor Corp., also had strong years on both sides of the border.

Results were a little less dismal in Canada for Ford and GM. Ford’s sales slipped 1 per cent and GM posted a 2-per-cent gain.

As it did in the U.S. market, Chrysler outperformed its rivals in Canada with a 3-per-cent jump that vaulted it into second place ahead of Ford, for the first time on record, according to Mr. DesRosiers, whose data go back to 1960.

One trend that played a key role in wiping out profits for Ford and GM was high gas prices.

Gas topped $1 a litre in Canada and $3 (U.S.) per U.S. gallon and shredded sales of SUVs, which generated the bulk of the profit for the two largest Detroit-based auto makers for most of the past decade.

The decline in SUV sales meant that passenger cars picked up a bigger slice of the market in the United States for the first time since 1981, George Pipas, manager of sales analysis for Ford, said during a conference call from the company’s headquarters in Dearborn, Mich.

“We believe 2006 will be another year in which car sales will likely gain market share for the industry.”

That trend played into the hands of the Chrysler group, which rode its redesigned full-sized cars made in Brampton, Ont., to the gains it racked up in the U.S. and Canadian markets.

Ford is hoping to take advantage of the trend this year with its new, mid-sized Ford Fusion, Mercury Milan and Lincoln Zephyr cars.

Canadians have never had the same appetite for SUVs and pickups as Americans, but Ford is hoping those cars will also restore its place in the Canadian passenger car market, where it fell to fifth spot last year.

Honda’s Civic was the best-selling passenger car in Canada for the eighth successive year, but fell short of knocking off Ford’s F-series pickup as the best-selling vehicle in the country. Ford sold 69,547 of the full-sized pickups, while Honda sold 68,494 Civics.

The strength of the Civic also helped Honda Canada Inc. surpass Toyota Canada Inc. in sales last month.

Despite that December performance, Toyota posted its best year yet in Canada, with a 3-per-cent jump in sales to 175,787 vehicles from 170,216 a year earlier.

Toyota ranked second in passenger car sales on an annual basis by selling 132,842 cars. Honda placed third with 110,597, while Mazda Canada Inc. grabbed fourth spot by selling 67,523 cars.

Those showings relegated Ford and the Chrysler group to also-rans in the car category and underlined one of the key themes that dominated both markets in 2005—the decline in market share of the Detroit-based companies and the continuing rise of Asia- and Europe-based auto makers.

During October, market share for Chrysler, Ford and GM slipped to below 50 per cent for the first time in history in Canada, although their share bounced back from that level in November and December.

In addition to surpassing Ford and Chrysler in car sales, both Honda and Toyota produced more vehicles in Canada last year than Ford.