Automakers see slower U.S. sales growth in 2012

DETROIT Wed Jan 4, 2012 4:59pm EST

Chrysler 300 cars are displayed on stage during the press day for the North American International Auto show in Detroit, Michigan January 10, 2011. REUTERS/Rebecca Cook

Chrysler 300 cars are displayed on stage during the press day for the North American International Auto show in Detroit, Michigan January 10, 2011.

Credit: Reuters/Rebecca Cook

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DETROIT (Reuters) - Automakers forecast slower U.S. sales growth in 2012, citing weak employment and economic uncertainty, even after closing December on a strong note.

The industry is headed for full-year 2011 sales of about 12.8 million vehicles, 10 percent higher than 2010. U.S. auto sales have been a relative bright spot, with many cash-strapped consumers forced to purchase cars and trucks to replace vehicles that have been on the road for a decade or longer.

U.S. December sales at Chrysler and Volkswagen AG rose 37 percent and 36 percent, respectively, while Ford Motor Co and General Motors Co posted gains of 10 percent and almost 5 percent.

Outside the luxury segment, the gains came without the boost from cash-back offers and other incentives the industry has sometimes relied upon heavily in the past.

At the lower end of forecasts for 2012, the growth rate would be half of last year's rate, leaving the industry far short of the nearly 17 million vehicle sales it averaged in a 10-year period through 2007.

U.S. new-vehicle sales are an early indicator each month of consumer spending, and analysts said December results were boosted by lower interest rates and a greater selection of vehicles on dealer lots.

Analysts said U.S. automakers have slashed enough jobs and closed plants to make money even at the bottom of the industry's bust cycle, but executives remain conservative.

"We're still in a recession-like industry," GM U.S. sales chief Don Johnson told analysts on a conference call after offering the automaker's growth forecast for 2012.

GM and VW expect total U.S. industry car sales in 2012 in the range of 13.5 million to 14 million vehicles, which implies growth of between 5 and 9 percent. Ford sees a range of 13.2 million to 14.2 million, excluding medium and heavy-duty trucks.

"The momentum coming out of the fourth quarter gives us confidence that the low end of that forecast is less likely," Ford economist Ellen Hughes-Cromwick said on a conference call.

Industry research firm TrueCar.com expects 2012 U.S. auto sales to reach 13.8 million vehicles.

While some forecast 2012 industry sales growth in the range of 5 percent to 9 percent, Guggenheim Securities analyst Matthew Stover expects growth closer to 4 percent.

"You still have anemic income growth," he said. "With relatively weak employment trends, sluggish real-income growth and consumer confidence that is improving but not strong by any stretch of the imagination, it doesn't feel to me like a traditional cyclical recovery."

However, U.S. auto sales remain a relative bright spot even at lower growth rates in a country where consumer spending is expected to rise less than 2 percent in 2012 according to the December Thomson Reuters/University of Michigan Surveys of Consumers.

UNCERTAINTIES

Jonathan Browning, who heads VW's U.S. operations, said the automaker chose to give a forecast range for 2012 sales because of uncertainties including the U.S. presidential election and the debt crisis in Europe.

"It just reflects the macroeconomic volatility we see around the world," Browning said of VW's forecast. "It's wise to have some flexibility in your plan."

Industry executives have repeatedly said pent-up demand would boost U.S. growth in 2012 because the average car on the road is 11 years old. Ford estimated that about 50 million vehicles, or one of every five on the road, is now 11 to 15 years old.

"If you look at the overall conditions that typically fuel car buying, I see this as more a glass half full," TrueCar analyst Jesse Toprak said of the outlook for 2012.

Automakers appear to be more disciplined about the types of sales deals they offer consumers. Incentives fell about 3 percent in December and are expected to remain flat or even fall in 2012, according to TrueCar.

The picture in other markets is mixed. Sales in Western Europe are expected to reflect that region's economic hard times, but in Brazil auto sales are seen rising 4.5 percent this year, compared with a 2.9 percent increase in 2011.

In the United States, Chrysler and South Korea's Hyundai Motor gained market share last year at the expense of Japan's Toyota Motor Corp and Honda Motor Co Ltd, both of which suffered from fewer cars to sell due to the Japan earthquake and Thai floods.

In December, GM's increase was due to strong demand in its Chevrolet brand, where sales rose almost 9 percent. Sales of the Cruze small car jumped 54 percent, while the Sonic subcompact increased 42 percent compared with its predecessor car, the Aveo.

Ford's U.S. sales, which came in above expectations, were helped by its best month for retail sales -- as opposed to fleet sales -- since 2005.

The gain at Chrysler, which is controlled by Fiat, was due to a refreshed lineup of cars and trucks. For the year, sales at Chrysler finished up 26 percent, and the automaker said it gained 1.3 percentage points of market share.

Hyundai sales rose 13 percent, while Toyota performed better than expected, coming in essentially flat compared with December 2010 instead of the decline analysts had expected. Nissan Motor Co Ltd's sales rose 7.7 percent, and Honda Motor Co Ltd sales fell almost 19 percent.

GM shares were up 0.4 percent at $21.14 on Wednesday afternoon, while Ford shares were up 2.5 percent at $11.41.

(Additional reporting by Kevin Krolicki in Detroit; editing by John Wallace, Mark Porter and Matthew Lewis)

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