US auto sales up in March; pickup trucks popular

Courtesy of AP: America is getting back to work, and it needs pickup trucks.

Strong truck demand in March drove U.S. auto sales to their highest monthly total since August 2007, as everyone from oil and gas producers to local home builders raced to replace the aging trucks they held onto during the recession. Overall auto sales rose 3.4 percent to 1.45 million, according to Autodata Corp.

“I think day-to-day business is the best it’s been in five years,” said Tim Parker, owner of a Chrysler-Dodge-Jeep-Ram dealer in Hot Springs, Ark. Parker recently joined a Chrysler program that helps him stock pickups so he has inventory ready when business owners come calling.

March is typically a good month for the auto industry. Many car buyers put tax refund checks toward a down payment. And Japanese automakers, whose fiscal year ends in March, often juice sales with deals to end the year on a high note.

But this year had additional incentives for buyers. Fuel prices ended the month lower than a year ago. The number of Americans seeking unemployment benefits fell to a five-year low during March. Interest rates are low and home values are rising. And the stock market – which is a strong predictor of auto sales – closed the first quarter with the S&P 500 at an all-time high.

Still, the pace of growth has slowed from last year, when double-digit gains were commonplace as Japanese automakers came roaring back after the 2011 earthquake in Japan. Auto companies are settling in for a period of slower but sustained growth.

Cars with the latest designs are enticing buyers. The redesigned Nissan Altima sedan outsold the Toyota Camry, the perennial midsize king, in March by 100 vehicles. That hadn’t happened since May 2011, according to Ward’s AutoInfoBank. The redesigned Honda Accord, which went on sale at the end of last year, also came close to outselling the Camry, which was last redesigned in 2011.

Small car sales have slowed, in part because gas prices are relatively low. AAA said the average price for gas fell in March for the first time in a decade, down 14 cents to $3.64 a gallon. Sales of Toyota’s Prius hybrid dropped 23 percent in March.

But pickup trucks made up for that. GM, Ford and Chrysler sold a total of 154,722 full-size pickups, up 14 percent from a year ago. It’s the third straight month that pickup sales have outpaced overall industry sales.

Pickup truck sales should keep increasing through this year and at least into early next year, said Jeff Schuster, senior vice president of forecasting for LMC Automotive, a Detroit-area forecasting firm.

Small businesses and the housing industry are recovering from the recession after a long lag. Oil production in the U.S. is higher than it’s been in two decades. And automakers are offering big discounts on trucks. GM, for one, is trying to clear out older models before the debut of its 2014 pickups later this spring.

Car buying site Edmunds.com estimates that GM offered $5,800 in discounts on the Chevrolet Silverado in March, compared with $4,010 for its chief rival, Ford’s F-150.

“I think the pickup truck battle is starting to heat up at the same time demand heats up,” Schuster said.

On Tuesday, Edmunds.com raised its forecast for full-year U.S. sales to 15.5 million from 15.0 million. That’s much healthier than the 10.4 million sold during the economic downturn in 2009, although still below the 17 million recorded in 2005. The industry sold 14.5 million cars and trucks last year.

Conditions look so good that some analysts think automakers will have to increase production and hire more workers to keep up.

Automakers have added 125,800 jobs since February of 2010. That’s a nearly 20 percent increase in industry employment, according to the U.S. Department of Labor.

But Michael Robinet, managing director of IHS Automotive, which tracks production, said many U.S. auto plants are running almost around-the-clock to meet demand. By the end of the year, more than half the vehicles made in North America will come from plants running the maximum three shifts, Robinet said.

“We’re really bumping up against the edge,” he said. “So it really is brick-and-mortar time.”

Ford is already producing as many Fusion midsize sedans as it can sell, said Erich Merkle, the company’s top U.S. sales analyst. Supplies will be low until this fall. That’s when Ford adds a new shift with 1,200 workers at the Michigan plant that will build the Fusion.

“We’re going to need more capacity,” said Merkle. Ford plans to increase production in North America by 9 percent in the second quarter.

But after going through a severe downsizing during the recession, companies are also wary of adding factory space. They fear the cost of having too much if the economy heads south. GM said Tuesday that it has no plans to increase production because its factories can handle the expected slow-and-steady growth.

Ford and GM each reported sales gains of 6 percent for March. GM reported big increases for Buick and Cadillac, which both have new small cars. Ford’s Fusion sedan and Escape SUV both reported record monthly sales. Still, Ford’s Lincoln luxury brand was down 23 percent. But the arrival of the MKZ sedan at dealerships this month should help turn sales around, the company said.

Toyota sales rose 1 percent. Sales of the new Toyota Avalon and Lexus ES sedans doubled over last March, making up for declines for the Camry, RAV4 and most of Scion’s lineup.

Category: Featured, General Update, Management