Buyers shift gears to high-mileage cars
John Mathews, who manages a Toyota dealership in San Antonio, has witnessed the day Detroit auto-industry executives said would never come...
The Washington Post
WASHINGTON — John Mathews, who manages a Toyota dealership in San Antonio, has witnessed the day Detroit auto-industry executives said would never come.
"We are seeing people who are driving $40,000 Suburbans trading them in on $15,000 Corollas," said Mathews, whose Universal Toyota dealership competes in a state where big trucks and sport-utility vehicles rule the roads.
"The last 30 days have been unlike anything I've ever seen in the automotive industry," he said.
Even in hurricane-addled Alabama, people pouring in from Louisiana and Mississippi are popping into Treadwell Honda in Mobile looking for replacements for destroyed cars.
Salesman Harold Wesley said he can't keep Civics on the lot, new or used. "As soon as the new ones get here, they are sold."
Wesley said Honda is allocating dealers a few at a time to be fair. Treadwell's last shipment of 12 sold in three days.
Nationally, Toyota officials say the Corolla, one of the Japanese company's smallest and most fuel-efficient passenger cars, had 8.7 days' supply of inventory at the end of the third week in September.
In the industry, inventory of 50 to 60 days' supply is seen as adequate.
With only a nine-day supply of Civics, Honda officials are struggling to keep up with demand. "Inventories are as low or lower than they've ever been for the Civic," said Sage Marie, a Honda spokesman. "They're basically being bought right off the truck."
Even in Texas, people who have bought trucks for years are rushing to dump them.
While small-car sales are helping to lift the Japanese automakers, Detroit's General Motors and Ford are sinking under the weight of large sport-utility vehicles, once the industry's cash cows.
The two automakers have reported substantial slides in profits in their North American operations this year, and their bonds have junk status on Wall Street.
The interest in small cars has caught the two automakers unprepared, said Dave Healy, an industry analyst at Burnham Securities in New York.
For the Big Three, Healy said, investment followed profit margins. "As long as the SUV segment was doing well, they poured money into that and neglected small cars," Healy said. "At that time you could have made a very good case that it was giving the public what it wants."
In yesterday's auto-sales reports for September, SUVs took a hit industrywide.
Sales of the GMC Envoy and Chevrolet Tahoe fell more than 50 percent compared with a year earlier. The Cadillac Escalade, Mazda Tribute, Ford Explorer, Ford Expedition, Toyota Sequoia and Nissan Armada all saw their sales fall by 18 percent or more. Dodge Durango sales dropped 11 percent.
General Motors saw a 24 percent drop in overall sales. Its SUV and truck sales fell 30 percent, while its car sales dropped 14 percent.
Ford also took a hit, with sales down nearly 20 percent. Ford, Lincoln and Mercury car sales rose 6 percent, but sales of trucks and SUVs fell nearly 28 percent.
Chrysler bucked the trend among U.S. automakers, reporting a 4 percent increase in September, led by a 26 percent jump in car sales. The Dodge Neon, which Chrysler stopped making two weeks ago, saw a 69 percent increase. Chrysler's truck and SUV sales were down 1.8 percent.
Toyota's sales were up 10 percent, thanks to a 22 percent increase in car sales. Sales of the hybrid Toyota Prius surged 90 percent.
Nissan said its sales rose 16.4 percent, led by a 26.5 percent increase in car sales. Honda's sales rose 11.7 percent, thanks to positive response to the redesigned 2006 Civic, which helped boost car sales by 20 percent.
Hyundai's sales rose 9 percent in September. The South Korean automaker's overall sales were up 10 percent for the year.
Brad Boeckmann, vice president of North Hills, Calif.-based Galpin Motors, the biggest Ford retail dealer in the nation, said Ford's "family price" employee discounts "propped up" sales of large SUVs at the dealership.
"When the family pricing goes away, obviously Ford and the dealers are going to need to do something to get people's attention again," he said.
Dealers say inventory of used SUVs is building up. Raj Sundaram, president of Automotive Lease Guide, which tracks vehicle-resale values, said SUVs remain under pressure.
"Can anybody answer the million-dollar question — when is this going to turn around and end?" he said. "Nobody seems to know."
GM and Ford are getting some benefit from greater interest in small cars. George Pipas, Ford's U.S. sales-analysis manager, said inventories are tight for the Focus.
Sales of the Focus have grown 10 percent in the past 90 days, compared with a year ago, said Pipas. To meet demand, the Focus plant in Wayne, Mich., has had fewer shutdowns than in past years.
"As far as we can see, Wayne is going to be running," Pipas said. "But the sales pace may outstrip our production for the foreseeable future."
Over the years, Detroit's investment in new cars has taken a back seat to developing more truck and SUV models.
Last year, GM introduced the small Chevrolet Cobalt, but consumers were cool early on. Ford hasn't significantly updated the Focus in the past six years.
Both companies have new or redesigned models headed for showrooms in coming months. DaimlerChrysler is also concentrating on bringing out smaller SUVs that get better fuel economy, an area of sales growth.
Paul Ballew, GM's chief market analyst, said the level of consumer interest in small cars is being overplayed. He said Japanese carmakers are benefiting most because of experience in the segment, particularly in their home market.
Meanwhile, Ballew said GM was having a "solid" small-car month and that GM will continue running its Lordstown, Ohio, plant where the Cobalt is assembled at a "very aggressive clip."
Ballew said GM will continue to watch the car market before making additional plans to bring out more small cars for American buyers.
Honda and Toyota are moving forward. This month Honda launched the latest Civic that includes a remodeled hybrid and high-performance models.
In recent years, Toyota launched the Scion brand — a line of small cars marketed to younger buyers. Scion has a tight 7.2 days' supply.
Information about yesterday's auto-sales reports provided by The Associated Press