Making Detroit Smile
By Rod Kackley
This goes right along with what analysts were saying at the Center for Automotive Research Management Briefing Seminars in Traverse City, Mich. a few weeks ago.
It is alsojust what Detroit and the rest of the auto manufacturing world (and you know that includes Ontario, Canada) really wants to hear.
The August new-vehicle selling rate is expected to be the
highest monthly rate in more than four and one-half years, according to a
monthly sales forecast developed by J.D. Power and Associates' Power
Information Network® (PIN) and LMC Automotive.
Retail Light-Vehicle Sales
August new-vehicle retail sales are projected to come in at
1,066,200 units, which represents a seasonally adjusted annualized rate (SAAR)
of 12.3 million units. The year-over-year growth rate in retail sales continues
a double-digit trend for a fourth consecutive month. Retail transactions are
the most accurate measurement of true underlying consumer demand for new
vehicles.
"August continues this summer's trend of healthy growth
in retail sales as dealers work to sell down inventory in time to make room for
2013 models," said John Humphrey, senior vice president of global
automotive operations at J.D. Power and Associates. "To date, automakers
have been diligent in better balancing production with demand, which has been
critical to the improved financial performance for many brands. Going forward,
this discipline will be tested as demand looks to cool somewhat through the
balance of the year."
While incentives are down slightly in August, compared with
July ($106 less per vehicle, on average), there are deals driving some activity
as the model-year sell down takes hold. Consumers are pushing aside the
economic risks, as the need to replace their current vehicle is matched by
availability of both inventory and credit.
Total Light-Vehicle Sales
Total light-vehicle sales remain stable, with the volume in
August expected to come in at 1,285,300 units, a 16 percent increase from
August 2011. Fleet represents only 17 percent of total light-vehicle sales,
which is lower than the 21 percent year-to-date average.
Sales Outlook
LMC Automotive recently revised the outlook for total
light-vehicle sales in the United States downward to 14.3 million units from
14.5 million units, with retail sales at 11.4 million units, down from 11.5
million units. Weaker economic growth and concerns with the European crisis are
the driving factors for slower growth during the second half of the year. The
industry is still expected to achieve the 15-million-unit level in 2013, but
the outlook has been tempered from a projected 15.2 million units, as the risks
in 2012 spill over into next year.
"The strength in August light-vehicle sales takes some
of the pressure off expectations for the balance of the year, but a high level
of risk lingers," said Jeff Schuster, senior vice president of forecasting
at LMC Automotive. "We expect the current seesawing in auto sales to
continue for the foreseeable future, but the overall picture in 2012 remains
positive."
North American Production
North American light-vehicle production volume has increased
by 23 percent through the first seven months this year, compared with the same
period in 2011. The increase of nearly 1.7 million additional vehicles
highlights the industry's recovery from the challenging production environment
in 2011.
Production for Honda and Toyota in the first seven months of
2012 are up 79 percent and 65 percent, respectively, as recovery by both
manufacturers takes hold. U.S. manufacturing growth is outpacing the rest of
the North American region, with a 27 percent year-to-date increase as newer
capacity drives the growth. Production in Mexico has increased 14 percent, with
further growth expected as new key models ramp up. Canadian manufacturing has
increased 20 percent year to date, but the level of future volume is at risk,
as the domestic manufacturers and CAW begin labor negotiations.
Vehicle inventory in early August declined slightly to a
54-day supply, compared with 58 days in July. Car inventory remains at a
below-normal level with a 47-day supply, down from 49 days in July. Truck inventory
is at normal levels with a 61-day supply, down from 67 days in July.
"With the robust production activity outpacing the
increases in demand, North American volume is approaching the 15.0-million-unit
level for the first time since 2007," said Schuster. "However, given
that inventory has normalized and growth in demand is expected to slow, LMC
Automotive is holding the forecast for 2012 at 14.9 million units for the
year."
However this still begs the question, are we really ready for this auto industry revival? Where is the talent? More on that and other manufacturing stories are posted at www.rodkackley.com
And please don't forget the story of the reinvention of Grand Rapids, Mich., Last Chamce Mile: The Reinvention of an American Commujnity, is now on sale at www.rodkackley.com.
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