GM loses as Toyota rebounds

The Japanese automaker promised an aggressive sales effort once it got back on its feet, and it began in January.

By Motley Fool Pick of the Day Feb 3, 2012 5:31PM

By John Rosevear

 

So much for concerns about auto sales: U.S. sales of cars and light trucks (pickups and SUVs) were up 11% in January over year-ago numbers, a strong result that suggests economic momentum is increasing. That result was good enough to put the annualized sales pace at 14.1 million, the highest monthly mark posted since the "Cash for Clunkers"-fueled sales boomlet in August of 2009.

 

Buried in the numbers are several trends worth noting, starting with a big one: After two years of troubles, Toyota (TM) is finally starting to roar back -- and General Motors (GM) has already lost some ground.

 

A troubling note for GM
GM's sales were down 6% over (admittedly strong) year-ago figures, and that was despite an unusually hefty proportion of fleet sales, which made up 30% of the company's total for the month.

 

That's an eyebrow-raiser. Low-margin fleet sales were a bane of bad old Detroit, when the Big Three used them as a crutch to keep production high as consumer interest in their products waned. That history means that any jump in Detroit's fleet numbers (and this was a jump; an average around 25% has been more typical recently, and is regarded as healthy) is going to be viewed skeptically by analysts.

 

But this jump shouldn't be cause for too much concern yet: As Edmunds analyst Michelle Krebs points out, January is typically a high month for fleet sales. Ford's (F) fleet numbers for the month were unusually high as well, though the Blue Oval managed an overall sales gain for the month. And GM executives, like their Ford counterparts, did say that they expect that percentage to fall back to normal ranges in coming months.

 

But it's a telling sign that the General posted a sales decline despite the fleet-sales cushion. Sales of both Buick and Cadillac brand vehicles were off sharply, as both brands are waiting on fresh products. Chevy did better, with good results driven by strong sales of one of GM's best new cars, the Cruze compact, and one of its golden-oldies, the big Suburban SUV. The Camaro, another of GM's more recent offerings, also saw strong sales on the month.

 

Expect that to be a theme in coming months. GM's efforts to overhaul its product line came to a crashing halt during the company's downward spiral, and it lost substantial ground to competitors like Ford who were able to continue investing in new product programs during the downturn. GM is now moving aggressively to make up for lost time, but it takes time to develop new vehicles -- quite a lot of time. Approximately 30 months or so is typical for a new-car program, and much of GM's pre-bankruptcy work had to be torn up and restarted from scratch, as the competitive landscape had shifted in the interim.

 

GM's new cars and trucks are coming, and signs so far suggest that they'll be quite competitive. But they won't be rolling out in quantity until 2013 and 2014. In the interim, strong competitors will be able to gain sales ground against the general.

 

Strong competitors, for instance, like Toyota.

 

Godzilla's back, and boy is he mad
There was never any question that Toyota was going to be very aggressive in winning back lost market share once the company got its production issues straightened out, and January saw the beginnings of that effort. Toyota's sales were up 7.5% on the month, a result comparable to Ford's, but driven by somewhat different segments of the market.

 

While Ford saw success with its compact Focus and small SUVs, Toyota posted an eye-popping year-over-year gain of almost 56% for its perennial class-leading Camry, and a 79% gain for its big Avalon sedan. Prius sales were solid, too, up almost 9%, but sales of the compact Corolla were down significantly. The Corolla sales may be decreasing due in part to continuing inventory challenges during the first part of the month, and possibly due to the strength of the smaller Yaris, which posted a 64% gain over low year-ago numbers.

 

Honda (HMC) also posted a solid gain on the month -- just shy of 9% -- as it continued to try to get its own supply lines back to something like normal. Its pace was led by big gains for the Civic compact, continuing the theme seen at Ford -- but it was also something of a surprise, as the current Civic has been widely panned by reviewers.

 

The upshot: Now it gets complicated
2012 is already shaping up as a rough battle for market share. Spending on "incentives" -- those cash-back and zero-percent financing deals funded by automakers to juice sales -- could rise sharply as the battle heats up. Toyota has already signaled that they will spend heavily to regain lost share, and the other automakers may be forced to spend to keep up.

 

A price war won't help anyone's margins, of course, and with the big global automakers already squeezed by difficult economic conditions overseas, a reduction in U.S. profits could hurt. Is that where things are going? Keep an eye on this space.

 

Fool contributor John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors, as well as creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Tags: FgmHMCTM
11Comments
Feb 3, 2012 5:53PM
avatar
% of increase is useless. you need the total number sold if you want to impress anybody.  i could have had a 400% increase in sales last month. what does it mean. nothing. i could have sold none the previous year and i sold 4 this year.
Feb 3, 2012 8:31PM
avatar
Good for Toyota.  They make an incredible product that is of far better quality than any of the autos produced by GM (Government Motors).  All of their models surpass GM models in quality, durability and price..........and they don't stand around waiting for taxpayer bailouts, which by the way will NEVER be repaid.  Go Toyota!!!!!!!!   By the way,  I love my Prius and my RAV 4.  As for % increases, you know what they say:  1) There are lies, big lies and then there are statistics; and 2) Figures don't lie, but liars often figure.  Have a great day, Muchacho!!
Feb 3, 2012 8:10PM
avatar

Hey Gatsbys,

Check out the class action lawsuits from the Prius buyers.  These are not 'lawyer represented' plaintiffs. But customers representing themselves in a court of law.  Seems the manufacturer mis-represented the fuel mileage savings with these vehicles.  Ouch!

 

Feb 4, 2012 5:31PM
avatar
They can keep their cars for all I care, I like GM
You and the Government - That's where a good portion of their sales are coming from. I'm not pronouncing them dead just yet but - Give them another ten years and we will probably see them back in trouble. As for their stock - It's only for fools and the government to hold on to.
Feb 3, 2012 10:10PM
avatar

This article is terrible. What a joke

Feb 4, 2012 8:41PM
avatar
Well, here we have it from another expert filling up his column with fluff.  It would be interesting to read what he had to say six months ago and what he will be saying six months from now.  I was always told that an expert was somebody with a briefcase who was over two hundred miles from home and this guy probably qualifies for oak leaves and clusters. 
Feb 3, 2012 8:28PM
avatar
Time for some more Toyota "brake failures"?
Feb 4, 2012 10:37AM
avatar
"GM's a big loser" is the title of the story? Shouldn't it be "Toyota trying to rebound"? Don't we all remember the story of the "throttle sticking" problem? Toyota's that the "exhaustive research" by Toyota revealed that it was only the floor mats were  causing all the deaths and crashes, and US Government and NASA investigators had to force Toyota and levy heavy fines to get Toyota to do "due diligence" and stop hiding the facts and lying about their findings.  Eventually, Toyota had to recall 9,000,000 vehicles globally with a problem that turned out wasn't floor mats. What short memories we have, what else is being covered up? They can keep their cars for all I care, I like GM.
Feb 4, 2012 9:28AM
avatar

Hey Nufsaid1....No Ouch!  You are confusing unhappy Honda hybrid owners with thrilled Prius buyers. We get 48-50 on our 2011 and L-O-V-E it but I would not recommend you go out and buy one. That may cause a Prius price spike when I go to replace this one. Every 3 weeks when its time to fill up for less than $30 I smile and think to myself...best vehicle purchase ever. Nah...Prius owners are not out to sue....we are more apt to hug the manufacturer.

Feb 3, 2012 7:55PM
avatar

One word..."Prius"

 

 

21 people love paying $4/Gal at the pump while getting only 15 mpg to help support Arab oil sheiks...

Feb 3, 2012 8:33PM
avatar
see bwhat happens to our companies, because of greed, and they let toyota kill people and some dumb Americans think toyota is the best thing around, wrong! remember pearl harbor, and all the American live's that were taken by sneaking up on us ,hit us on a sunday and started a war, and to MANY aMERICANS NEED TO START BUYING OUR CARS, NOT GM, BUT FORD AND CHRSLER, AND SINCE GM WENT BAKRUPT, WHO CARES WHAT HAPPENS TO THEM, THEY LIED OVERPAID THE HIGHER UPS AND FIRE THE LABOR WORKERS, BUT GET AWAY FROM TOYOTA, THEY WERE GUILTY OF THEIR CARS HAVING ACCELERATOR PROBLEMS, AND THEY COME UP SAYING IT WAS DUE TO THE AMERICAN DRIVERS, WELL IT WASN'T TOYOTA WAS GUILTY AS GEORGE W. BUSH WAS, THEY ARE CROOKS AND LIARS . thank you very much. and buy american cars, and bring our factories back in the USA not mexico
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123
123 rated 1
262
262 rated 2
480
480 rated 3
651
651 rated 4
649
649 rated 5
629
629 rated 6
616
616 rated 7
496
496 rated 8
346
346 rated 9
111
111 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
EXCEXELON CORPORATION9
TAT&T Inc9
VZVERIZON COMMUNICATIONS8
CTLCENTURYLINK Inc8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.