Auto industry puts '05 behind it
DETROIT — Pass out the T-shirts, throw the confetti: We survived '05.
What a year: Thank God it's over. It'll be fun to slam the books on that gloomy year.
They say that what doesn't kill you only makes you stronger, so after this one, Detroit should emerge more rugged once again.
Tough times surely lie ahead in 2006. But this last year will go down in the history books as a particularly turbulent one.
Sales started off slow, but employee discounts for everyone brought on a sizzling summer only to be followed by a near-freeze in the fall. Sales were hobbled by concerns about the health of this auto-centric economy, which already was wracked by bankruptcies, the prospect of plant closures and tens of thousands of layoffs.
The five biggest sales events of the year help tell the story:
Foreign automakers continued clobbering Detroit's largest automakers, General Motors Corp. and Ford Motor Co.
Sales declined 3.7 percent at GM and 4.6 percent at Ford through November, compared with the same period a year ago. Combined market share for the two likewise fell to 44.8 percent, down from 47.2 percent in 2004. When one considers that each percentage point keeps a single assembly plant and several parts plants in business, that's a significant decline in workers and the local economy.
The Auburn Hills, Mich.-based Chrysler Group staved off attack. Sales were up 5.4 percent during that period, and its market share grew to 13.6 percent from 13.1 percent a year ago.
European automakers, whose sales were off 3.6 percent through November, weren't a big threat this year.
Asian automakers, however, continued to be formidable. They made the biggest gains, with an overall sales increase of 6.5 percent through November. Their share of the U.S. market also swelled, to 36.5 percent from 34.5 percent a year ago. Chinese automakers might make their entry into the United States auto market this year, a move that might further strengthen the Asian auto bloc.
Employee pricing was a blockbuster hit, but it didn't help the bottom line much.
GM kicked off an Employee Discount for Everyone program in May, sparking an industrywide roller-coaster ride.
The cozy and catchy invitation to join the GM family — complete with proud ads featuring a cute worker badge and workers boasting about quality — easily eclipsed the success of GM's historic Keep America Rolling incentive program. That effort used 0 percent financing after the Sept. 11, 2001, terrorist attacks to prod auto sales up 24.4 percent, an increase that seemed enormous then.
But GM's clever employee pricing promotion caused its sales to surge 46.7 percent in June 2005, the first full month of sales under the program. Ford and Chrysler quickly followed GM with similar deals, causing sales of domestic brands to jump 21.8 percent in July.
By August, though, consumers seemed bored with the promotion. Still, local automakers continued offering the deals into September. But their combined sales fell 17.6 percent that month, according to the research firm Autodata Corp. of Woodcliff Lake, N.J.
While the programs were heralded for their ability to clean out excess inventory, they didn't seem to help the bottom line much at GM and Ford. During the third quarter, which covers July, August and September, GM lost $1.6 billion, and Ford lost $284 million.
At Chrysler, discount prices combined with hot new models resulted in a profit boom. The U.S. division of DaimlerChrysler AG posted an operating profit of $374 million, a 43 percent improvement over the prior year.
For the first time in recent memory, truck sales declined and passenger car sales increased. With gas prices passing the $3 mark briefly in 2005, big vehicles became increasingly unfashionable.Through November, passenger car sales were up 2.8 percent, while sales of light trucks, a category that includes minivans, pickups and SUVs, fell 0.6 percent.The rejection of the truck was unmistakably bad news for automakers such as GM and Ford, which sell a lot of the profitable big vehicles. While both had popular new cars in dealer showrooms, such as the Ford Fusion and Chevrolet Malibu, the shift to smaller more fuel-efficient vehicles happened faster than either seemed to expect.Again, Chrysler bucked the trend. With popular new models, Chrysler's sales through November were up 13 percent for cars and 3.4 percent for trucks.Still, the trend away from trucks was so pronounced that some experts declared 2005 the Year of the Car. But crossovers, which are built on car platforms and often look like SUVs, were up 12.1 percent through November. Depending on how you analyze the numbers, that makes crossovers, which include the Ford Freestyle and Saturn Vue, the fastest-growing vehicle category.The move away from trucks, especially SUVs, has been under way for some time. But a surge in gas prices over the summer caused drivers to trade in their Ford Explorers and Chevy Suburbans faster than anyone expected, hurting automaker profits.