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October auto sales soar
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November 1, 2001: 4:43 p.m. ET
Zero-interest loans spark a sales spike despite overall spending slowdown.
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NEW YORK (CNNmoney) - Consumer spending may have plunged in October, but zero-percent financing and other incentives proved irresistible to Americans who snapped up cars, trucks and SUVs at a torrid pace last month, the nation's automakers said Thursday.
General Motors (GM: up $0.98 to $42.30, Research, Estimates) and Ford Motor Co. (F: up $0.32 to $16.37, Research, Estimates) each posted a more than 30 percent jump in October sales, and extended their zero-percent financing programs through most of November.
GM, the number-one U.S. automaker, said sales spiked 31.2 percent in October to 554,652 units, its highest sales level in 15 years. Truck sales increased 47 percent, an all-time monthly sales record.
Ford said its sales jumped 34 percent from a year ago to 418,243 units.
Chrysler, the U.S. unit of Germany's DaimlerChrysler (DCX: up $1.40 to $36.00, Research, Estimates), posted a 5 percent increase in October sales to 209,478. The company said that in addition to its zero-percent financing program, it now will offer a seven-year, 100,000-mile powertrain warranty for vehicles purchased during the last two months of the year.
Jeep Liberty posted a 13 percent sales increase from the previous month to 15,993 units without incentives. The popular PT Cruiser sold 14,611 units for the month without zero-percent financing.
The results are about what analysts expected as the world's biggest automakers offered zero-percent and low-interest financing in the wake of the Sept. 11 terrorist attacks.
Auto sales had been disappointing for most of the year as the economy began to slide and consumers cut back on big-ticket purchases. Automakers had been offering various incentives in order to drive sales, sparking fears among industry watchers and investors of a price war that could hurt the industry in the long-term by getting consumers used to bargains.
Industry sales plummeted in the weeks immediately following the attacks, which spurred increased fears of a recession and a wider pullback in consumer spending except for basic necessities. Auto sales bounced back after the Big Three initiated steep incentives such as zero-percent financing at the end of September. October represents the first month this year to show positive year-to-year growth in auto sales.
However, that does little to help profits since the lower prices cut into profit margins.
Ford (F: up $0.32 to $16.37, Research, Estimates) said its sales soared 34 percent, breaking the number-two automaker's 24-year record, to 418,243 vehicles, including imported makes and heavy trucks. Car sales totaled 158,996, up 35.7 percent, while truck sales totaled 259,247, up 33.7 percent.
George Pipas, Ford's U.S. sales analysis manager, said the zero-percent financing program will be extended through Nov. 20, but that the torrid sales pace of October would not be repeated because the program pulled in sales from as far out as the first quarter of fiscal 2002. Additionally, the sluggish economy and the company's reduced production schedule have limited inventory to about a 40-day supply.
The financing program also nearly wiped out the 2001 model-year inventory, meaning the focus of the offer will be shifted to newer 2002 models, Pipas said during a conference call with analysts and the media.
"Our main contention here is that we do expect sales to fall off from these levels that are obviously quite high, and I think it's fair to say you can't maintain a sales rate which for the industry we estimate is going to be a at or near record levels," Pipas said. "If you analyze this from a macro view, it's clear there is going to be payback from this program in the year ahead."
The company estimates full-year industry sales at about 17 million units.
The Ford F-Series pickup, the best-selling vehicle in the United States, had its best month ever with 102,424 sold, up more than 10,000 from its previous monthly record set in June 2001.
Sales of Ford's Explorer SUV, which was the focus of a massive tire recall earlier this year and last year and is the best-selling SUV in the United States, jumped 45.2 percent from a year ago to 44,640 units.
Pipas said the Explorer is on track for more than 200,000 unit sales for the year.
Mercury sales grew 60.3 percent from a year ago, led by the Mountaineer SUV, whose sales climbed 33.9 percent to a record.
Lincoln sales grew 4.2 percent.
Ford's British Jaguar unit posted a 31.3 percent increase from a year ago, while the high-end Swedish Volvo division posted its second-highest sales result ever at 10,455 units.
GM said the new Chevrolet TrailBlazer, GMC Envoy, Oldsmobile Bravada and Buick Rendezvous increased mid-size SUV sales 47 percent from a year ago to 56,323 units.
Car sales rose 16 percent to 244,113 led by the Chevrolet Impala, Malibu and Cavalier.
Despite the strong sales, GM also anticipates earnings and sales pressure in the fourth quarter and first half of 2002 as a result of its "Keep America Rolling" zero-percent financing program.
"We do have some payback out there staring us in the face," Paul Ballew, GM's executive director for market and industry analysis told analysts during a conference call Thursday.
Ballew estimated fourth-quarter sales of about 17 million units and full-year sales close to that number, however, he took a cautiously optimistic stance over the long-term outlook.
"We expect pressures to remain for the present. We're not kidding ourselves," Ballew said. "As we look at the current near-term outlook there's sluggishness out there. However, the long-term picture is not entirely negative. The fundamentals for economy remain very positive for the industry as a whole."
Overseas automakers also posted gains for the month, though they did not offer zero-percent financing to the extent of the Big Three.
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Honda posted an 18.8 percent rise in U.S. sales to 105,572 units, led by sales of the Civic, CR-V and Odyssey SUV. The company's Acura division posted a 17.1 percent increase for the month.
Mitsubishi Motors reported a 17.6 percent increase in October sales and said it had extended zero-percent financing to all its vehicles through Nov. 30.
And Nissan posted a 7.1 percent sales increase compared with a year ago, led by the Altima.
Overall, industry analysts expect October sales will hit a seasonally adjusted annual rate of 20 million vehicles, far higher than any point this year and just shy of the record of 21 million set in September 1986.
The boom in auto sales, which account for about 22 percent of all U.S. retail sales, flies in the face of the U.S. Commerce Department's report on Thursday that U.S. consumer spending fell at its fastest pace in more than 14 years in September. 
from staff and wire reports
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