Wednesday, September 5, 2012 | Edited by Daniel Moores
||U.S. Light-Vehicle Demand Climbs 20 Percent in August
Honda, Toyota, VW, Detroit 3 Set Pace with Late-Summer Surge
U.S. auto sales -- led by Honda Motor Co., the Volkswagen Group and Toyota Motor Corp. -- jumped 20 percent last month for the strongest monthly pace in three years.
The Detroit 3 also posted double-digit sales gains for August, signaling the auto industry's recovery remains solidly on track despite sluggish economic growth, rising gasoline prices and widespread consumer uncertainty.
The seasonally adjusted sales rate for August accelerated to 14.53 million from 14.1 million in July and 12.5 million a year earlier. The results topped most analysts' forecasts and marked the highest SAAR since the U.S.-sponsored cash-for-clunkers program in August 2009.
U.S. new car and light-truck sales have advanced 15 percent to 9.7 million this year through August and remain a bright spot amid mixed economic signals and lackluster job growth.
"The auto industry continued to outperform the general economy in August," Bill Fay, Toyota group vice president and general manager, said in a statement. The company posted a 46 percent sales increase last month as it continued its recovery from an earthquake-hampered 2011.
Honda Motor Co. reported a 60 percent increase from a year earlier, when it also suffered from quake-related inventory shortages. Volume at the Honda brand jumped 58 percent to 115,675 units; Acura deliveries climbed 73 percent to 15,646 units.
Among major brands, VW led the way with a 63 percent jump, its 12th straight month of gains of at least 25 percent. Including Audi, up 13 percent, and other luxury brands, VW Group sales jumped 48 percent.
Pent-up demand, consumer discounts, new models, fleet deliveries, and more favorable credit are aiding light-vehicle sales. In some cases, automakers are also offering aggressive incentive programs that reward dealers for selling more cars and light trucks.
Chrysler sales chief Reid Bigland attributed his company's 14 percent increase in part to an "incredibly resilient" climate for auto sales.
Paul Taylor, chief economist for the National Automotive Dealers Association, said low interest rates, ample inventories and healthy incentives are driving the market.
"These factors support higher rates of growth of light vehicle sales growth this year and next," Taylor said on Tuesday.
August sales at the VW brand surged to 41,011 as the automaker continued to benefit from redesigned models in key segments, notably small and mid-sized sedans.
Toyota's 46-percent increase followed advances of 60 percent in June and 87 percent in May.
Chrysler was helped by a 21 percent gain in car deliveries and an 18 percent increase in Ram brand volume.
Ford Motor reported a 13 percent increase in sales last month, with retail volume up 19 percent over August 2011. Sales rose 13 percent at the Ford division and 2 percent at Lincoln.
The company said it also plans to boost fourth-quarter North American output by 7 percent -- or 50,000 vehicles -- to 725,000 over 2011 levels.
GM -- aided by Olympics advertising and a Chevrolet promotion -- said its sales rose 10 percent. GM's retail sales rose 11 percent while fleet deliveries climbed 6 percent.
Nissan Motor Co. said its U.S. sales for August totaled 98,515, up 8 percent from a year ago, while Subaru climbed 36 percent.
Hyundai Motor Co. said it set an August sales record of 61,099 units for the Hyundai brand, an increase of four percent from a year earlier.
At Jaguar Land Rover, sales jumped 31 percent last month, helped by new models such as the Range Rover Evoque.
"Clearly, August was a strong auto shopping month in the United States and for Jaguar Land Rover," Andy Goss, head of Jaguar Land Rover North America, said in a statement.
Honda, like Toyota, was expected to be among the industry's biggest gainers as it continues to recover from inventory shortages following the March 2011 earthquake in Japan. Civic sales rose 106 percent to 24,897 units last month, Honda said.
"Honda is finishing the summer on a high note," John Mendel, American Honda's executive vice president of sales, said in a statement.
August marked Chrysler's 29th consecutive monthly increase in U.S. sales, though the gains have slowed this summer from their torrid pace early this year.
The automaker continues to benefit from new or refreshed models, notably a stronger passenger car lineup, as well as generous incentives, fleet shipments and easing credit terms.
Chrysler said volume rose 25 percent at the Chrysler brand, 34 percent at Fiat, 13 percent at Dodge and 5 percent at Jeep.
Sales of the all-new Dodge Dart compact sedan totaled 3,045 units, the automaker said.
'Iron Man' strikes again
Chrysler's U.S. sales have advanced 26 percent this year, with car volume up 49 percent and truck deliveries rising 18 percent.
"Our Iron Man streak continued last month," Reid Bigland, head of the Dodge brand and U.S. sales operations for Chrysler, said in a statement. "An incredibly resilient U.S. new vehicle sales industry doesn't hurt."
TrueCar.com estimates industry incentives averaged $2,457 last month, down 2 percent from July and off 6 percent from August 2011. Chrysler, GM and Nissan offered some of the biggest deals in August, while Hyundai, Toyota, and Honda were less generous with discounts, TrueCar said.
"Underlying consumer demand remains solid," TrueCar analyst Jesse Toprak said, pointing to falling discounts and rising transaction prices compared to August 2011. "It could not be a better environment for automakers."
Toprak said the only negative facing the new-vehicle market right now is higher gas prices. Average U.S. gasoline prices rose 21 cents a gallon in the past month, Reuters says.
Among major automakers, Toyota, Honda and Chrysler have gained share this year while Ford, GM, Hyundai-Kia have lost ground. Nissan's share remains flat.
While some analysts say the sales pace could slow in the second half compared with early in the year, the industry remains on track to produce sales of 14 million units or more in 2012.
The SAAR has now topped 14 million each month this year except for January and May.
And industry sales have advanced each year since 2009, when sales plunged to a 27-year low of 10.4 million.
(Source: Automotive News, 09/04/12)
||Vehicle Sales Buoyed in U.S. as Bonus Incentives Grow
Car shoppers have long known that they can often buy at lower prices at the end of the month as dealers slash prices to meet sales quotas.
Their chances for such deals have been especially strong as 2012 wears on.
Honda Motor Co., General Motors Co. and Toyota Motor Corp. are all using so-called stair-step programs to give rewards to dealers whose sales reach thresholds set by the companies. Programs such as Honda's, which started in March to boost Accord deliveries, sweeten incentives for dealers by as much as $1,000 per sale and extend bonuses retroactively for cars sold in previous months, too.
The temptation to win those bonuses can lead to steep discounts or generous trade-ins, often enticing dealers to lose money selling a car so long as they are able to make more from the automaker's program.
It can be a costly way for automakers to do business and threatens to depress profits. Still, these programs achieve their goal: moving cars and making way for new inventory in dealership showrooms.
"When you're toward the end of the month, all dealers fight to hit their number," said Brian Hamilton, who owns stores selling GM, Chrysler and Subaru brands in Nebraska. "If you've got 15 or 20 to go, some dealers just give up and don't participate, but some do some crazy things to make their number."
Some dealers, including AutoNation CEO Mike Jackson, are pushing back against the spreading use of stair-step incentives. The practice hurts them by alienating buyers who don't get the end-of-month deal. It also crimps new-car sales margins and reduces the value of used cars, he said.
Using stair-steps amounts to "a game of three-card monte" with customers because the incentives are hidden from consumers, Jackson said in an Aug. 20 interview. "At a certain point, it can make sense to pay the consumer to take the car," said the head of the largest auto dealership group in the United States.
Sales managers have had hundreds of dollars of wiggle room in negotiating sales of Accord sedans at Hagerstown Honda in Maryland. Honda completed a stair-step program in August that began in March, which set Accord sales quotas for dealers and rewarded them with bonuses that could reach as much as $1,000 per Accord sold for hitting all of their targets.
"It's helped the consumer get a little bit better deal," said Paul Ritchie, owner of the Honda dealership about 70 miles northwest of Baltimore. "When the customer needs another couple hundred dollars for their trade, we've got something to work with. It just makes deals possible."
Honda's six-month Accord program helped the automaker with at least two objectives: winding down inventory of the 2012 model to clear way for the redesigned 2013 Accord, and kick-starting a recovery in the U.S. from inventory shortages and corresponding market-share losses caused by Japan's March 2011 tsunami.
Sage Marie, a spokesman for Honda's U.S. unit, declined to comment on the company's dealer incentive efforts. Honda's goal is to maintain residual values by avoiding customer cash rebates and direct sales to fleet customers, he said.
"Everybody has their reason" for introducing stair-step incentives, Jackson said. "The Japanese will tell you that with what they went through with the tsunami and the disruption to production and the lost share that this is what we have to do now to get back in the game, but we won't do it forever."
U.S. market share for Toyota rose 1.6 percentage points through July to 14.4 percent and 0.4 percentage points for Honda to 9.7 percent, according to researcher Autodata. "It's a carrot that the manufacturers hold out and we all run for it," said Hamilton, the Nebraska dealer.
Chrysler has used a three-tier program that awards bonuses to dealers for achieving sales in three given sales ranges, said Hamilton, who was named to a task force set up by the National Automobile Dealers Association in June to improve stair-step programs or do away with using them.
GM's programs have been tied to customer-satisfaction data and other metrics in addition to sales, Hamilton said in a telephone interview.
Ford Motor Co. is "to be admired" for holding the line against stair-step incentives in recent years, AutoNation's Jackson said.
"Manufacturers believe that stair-steps work or they wouldn't do them, but they also know that they don't work as well as they may appear," Don Chalmers, a Ford and Lincoln dealer in Rio Rancho, N.M., said in a telephone interview.
"When they end a program, there's always payback. The week or two after a program ends, the sales slow down significantly."
Stair-steps aren't the only short-term sales tactic that automakers have used this year that has drawn criticism from their dealers.
Nissan Motor Co. in March asked dealers to boost vehicle purchases from the manufacturer to use in rental-service fleets in March. The initiative helped Nissan notch 136,317 deliveries that month, the last of the company's fiscal year. The automaker hasn't exceeded 100,000 sales in any month since.
Of South Korea's Hyundai Motor Co. and Kia Motors Corp., the latter of the two affiliates occasionally uses stair-step programs, said Ritchie, who owns a Kia dealership next door to his Honda store.
"I don't like stair-steps but I don't know any way to get around them," he said. "It's just part of marketing right now, part of the industry these days."
Volkswagen AG has used such incentives to help reach its target of more than 500,000 vehicle sales in the U.S. this year.
"It used to be a few manufacturers that favored these programs, but now it's pretty much across the board," Jesse Toprak, an analyst at TrueCar.com and former finance and sales manager at several dealerships in the Midwest, said in a telephone interview. "When a consumer asks 'When's the best time to buy?' sometimes the old rumor that it's the last day of the month is kind of true."
(Source: Bloomberg, 08/31/12)
||Auto Lenders Go Back to Subprime Borrowers
U.S. lenders are giving as large a portion of new car loans to subprime borrowers as they did just before the start of the financial crisis, according to a new study.
Subprime, or less qualified, borrowers received 25.41 percent of all loans on new vehicles in the three months through the end of June, up from 22.29 percent in the same period a year ago and more than the 24.96 percent at the start of the financial crisis in 2007, Experian Plc's auto finance research unit said in a report released Tuesday morning.
The report also found lenders more aggressively making loans to subprime borrowers of used cars. Subprime borrowers received 56.46 percent of loans on used cars in the quarter, up from 52.70 percent a year earlier.
Banks and other lenders are under pressure to make up for profits lost to shrunken loan portfolios and low interest rates that persist five years after the financial crisis began.
Outstanding auto loans amounted to $682 billion at the end of the second quarter, still less the $701 billion in 2007, despite the easing of standards. The balance, however, was up about 5 percent from a year earlier.
Experian uses a proprietary scale to score the credit history of borrowers and determine which are prime and which are subprime.
Melinda Zabritski, director of automotive credit for Experian, said lenders are showing caution, however, on another key front: how much they lend against the value of new vehicles. The average loan-to-value on new cars was 109.55 percent, down 0.61 percentage points from a year earlier.
"Despite the rise in subprime loans overall, there is still a strong sense of managing risk," Zabritski said in a statement from Experian. "Because the overall lending environment has improved, lenders are making loans available to a wider range of customers."
On used cars, however, lenders required less cushion in value against loss. The average used car loan-to-value ratio rose to 126.62, up 0.62 percentage points from a year earlier.
The average amount financed for a new car rose $474 to $25,714. For a used car, the average amount financed rose $370 to $17,433.
The average time to repay new and used car loans increased by one month, to 64 months for new cars and to 60 months for used cars.
Lenders have been encouraged by the fact that more borrowers are making payments on time. The percentage of loans delinquent 30 days fell in the quarter to 2.52 percent from 2.59 percent.
Capital One Financial Corp nearly doubled its share of new car loans, which lifted its share of all second-quarter loans to 4.36 percent, according to Experian.
The biggest auto lender, U.S. government-owned Ally Financial Inc, saw its market share slip to 6.68 percent from 6.93 percent a year earlier.
Ally, which was originally the auto lender owned by General Motors Co, is facing the expiration next year of preferred lending arrangements with GM and Chrysler Group LLC in which the carmakers subsidize zero-interest loans.
Capital One, meanwhile, has been expanding its deposit base and increasing its loan portfolios with its acquisitions of U.S. credit card assets of HSBC and deposits of ING Direct.
(Source: Reuters, 09/04/12)
Daily Sales Tip: Sales Managers Should Manage, Not Sell
A true sales manager should never sell. This is a potentially fatal mistake that can utterly demoralize your sales team. Having your boss compete for leads creates a less than desirable sales culture and raises questions of objectivity. On top of that, sales managers are often too busy working their own leads to bother coaching and mentoring the salespeople working under them.
Great managers know that their primary responsibility is to place those they manage in the best possible position to succeed. Selling against the team destroys any respect the staff has for the manager and creates a toxic, underperforming sales environment.
If you need your sales manager selling, it's possible that you are not ready to have a dedicated sales manager. In this case, the CEO, Vice President, or General Manager should take on the sales management role.
The responsibility of a sales manager is to attend to these five things and these five things only:
1. Holding sales people accountable
2. Developing the team with training opportunities
3. Coaching sales professionals
4. Motivating sales staff
5. Recruiting new talent
Regardless of what you call him or her, someone needs to take responsibility for these things, and it should not be someone who is also responsible for selling.
Source: Sales consultant Bob Croston