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January sales lift GM, Ford
But news not all good as market share slips
Thursday, February 16, 2006

The nation's beleaguered Big Two automakers had a good January, but analysts say that just one month's improvement doesn't make a trend.

Aided by its decision to simplify and lower prices on a vast majority of its cars and trucks, General Motors saw sales rise 6 percent last month, to 293,113 from 276,566. Whether it made much money on the higher volume is a question, however, and even with the gains, its share of the domestic market slipped to 25.7 percent from 26.1 percent a year ago.

Even so, this was the first "up" month for GM since the Employee Price Discount for Everyone promotion in June and July, according to J.D. Power & Associates' monthly sales report for the automotive industry.

Ford also saw its sales climb, though by a smaller amount -- 2 percent to 202,375 from 198,658 a year ago. Like General Motors, though, its market share still fell, by a full percentage point to 17.1 percent in January, hurt by poor sales of many of its trucks and SUVs.

"Ford did not have the big price reduction program that GM had that it could promote," said Tom Libby of JD Power & Associates, "and Chevrolet was strongly promoting the fact that it was now the best-selling brand in the country; so Ford could no longer say that about its products."

GM, working hard to stave off talk of bankruptcy, chose to follow the model of its Saturn unit by reducing prices on most of its lineup before the vehicles show up at dealerships. The move was aimed at eliminating a lot of the hand-wringing that occurs when shoppers flock to showroom floors to buy -- the sort of deal-making that frustrates buyers and undermines GM's push to position itself as a value leader.

"This is part of a broader strategy to create greater certainty in pricing," said Peter Morici, a business analyst and professor at the University of Maryland's Robert H. Smith School of Business. "Hopefully, dealers will abstain from playing games with add-ons and fees, and consumers will be more confident that they are getting a fair deal and the best deal when they bargain," he said.

GM also benefited from a good reception of some of its all-new full-sized SUVs, most notably the Tahoe, which saw sales surge 53 percent in January, to 13,094 vs. 8,558 a year ago.

Ford benefited from strong car sales, led by the Fusion. The intermediate sedan sold almost 10,000 vehicles a month for the first time since its introduction, while sales of the Five Hundred large sedan were up by almost one third.

Sales of the latter, up nearly 33 percent last month, was particularly welcome news for Ford. The Five Hundred had been struggling on the sales floor since the sedan's introduction last year. Even though it generally was regarded as a good car by the media, it had been criticized for its styling and slow acceleration.

Unlike the Five Hundred, the Fusion has been a big success from Ford from the start, with many complimenting its handling and sporty European-styled interior. It's on track to sell more than 100,000 units this year.

Mustang, too, continues to sell strongly, with 11,208 units sold last month, compared with 10,285 last January, a 9 percent increase.

Ford officials continue to worry about truck sales, with sales for the full-size Expedition, for instance, being off by 29.8 percent; Ranger, dropping by 19 percent; and Escape, dropping by 14.4 percent.

Thanks in large part to its new entry-level Zephyr luxury sedan, sales in the Lincoln division were up 26.4 percent from a year ago, with 9,345 Lincolns sold last month, compared with 7,392 in January 2005.

But Mercury, weighed down by poor sales of its SUVs, experienced a 16.5 percent drop in sales, from 15,309 Mercuries sold in January 2005 to 12,781 last month. Mercury's full-size Mountaineer, which was redesigned for 2006, had a 23.6 percent decline in sales from 2,615 in January 2005, to 1,997 last month. Mariner, its small SUV, dropped 15.2 percent in sales last month compared with January 2005.

At GM, Chevrolet's Tahoe proved to be so popular that many dealers reported selling the SUV at or near sticker price -- a big contrast to what happened a year ago with the old model. They also are selling within a couple of days of arrival at dealerships, according to Automotive News.

"What's happened here is that Tahoe has received very positive feedback in the marketplace as well, and GM's program of price cuts that went into effect for Chevy models also was a strong factor in the sales results," said Mr. Libby.

The real puzzler, both for GM and for analysts, is why the GMC Yukon, the virtual equivalent of the Chevy Tahoe, did not sell as well as its Chevy counterpart. A total of 3,867 Yukons were sold in January, compared with 4,002 last year, a drop of 3.4 percent.

"Availability may be a big factor here," Mr. Libby said. "With new models, you don't know how the mix of models and availability will affect things. I don't know how many Yukons were actually for sale out there."

GM had good news among its passenger car lines, with the new pricing program having a big impact there as well, Mr. Libby said.

Cadillac sales were up by 4.7 percent in January, but it was the division's car lines that carried the day; a number of its truck models dropped.

Chevy Impala, which experienced a 7.6 percent increase in sales in January thanks to a well-received redesign, was one of the country's top 20 best-selling models. Other GM models on January's top 20 list were Cobalt (sales increase of 140.5 percent), Malibu (18.1 percent decrease), TrailBlazer SUV (24 percent increase) and Silverado pickup (6.6 decrease).

Pontiac, which last year was thought by some -- mistakenly, according to GM officials -- to be on the chopping block, had a 55.3 percent increase in sales, with 33,019 sold in January compared with 21,468 a year ago. Its Solstice sports car has been sold out or is in strong demand in most markets, and its G6 intermediate-size car has caught on strongly.

The Solstice and the Torrent, a midsize SUV, have been functioning as "halo" cars for Pontiac, drawing in shoppers and the curious, "but having a definite spillover effect in people buying other Pontiac models instead," Mr. Libby said.

Mr. Morici said GM had another potential ace card up its sleeve to increase sales.

"GM has indicated plans to alter advertising and emphasize more head-to-head comparisons between its offerings and those of Japanese competitors," he said. "That's good if GM is serious about this intention in its ads. When GM vehicles offer more content at the same price, or a lower price for the same content, or both, consumers need to know that."

First published on February 16, 2006 at 12:00 am
Don Hammonds can be reached at dhammonds@post-gazette.com or 412-263-1538.