Auto sales: Still a contact sport

cars_dealership_lot.cr.top.jpgBy Alex Taylor III, senior editor


NEW YORK (Fortune) -- The tabulation of U.S. auto sales for the month of February contains some big surprises. Consider:

Ford outsold General Motors for the first time in 12 years.

The Honda Accord passenger car outsold the Chevy Silverado pickup truck, which almost never happens absent a gas crisis.

Despite all its well-publicized troubles, Toyota sales only declined by 8.7%.

And some less heralded brands -- Volkswagen and Subaru -- recorded sales increases of a third and more.

Analyzing auto sales is notoriously tricky business. One-month results can easily be skewed by low inventories, high incentives, or an abnormal bulge in fleet sales. Just to add some spice to the mix, automakers have been known to fudge the results, counting as sold cars that have barely touched ground at a dealer's lot or, at times, holding back sales in a good month to boost results in the following month.

The most important message from February's results is that the selling of cars is still a contact sport. Stung by its fall from first place, GM already has reorganized its sales and marketing organization. It demoted some players and promoted others, to put more authority in the hands of the new North American boss Mark Reuss. Listening to Reuss' conference call announcing the moves, it was clear that he is already impatient to get sales moving. CEO Ed Whitacre now knows exactly who to call when he wants better results.

Meanwhile, anybody who thought Toyota (TM) was going to sit back and wait for the sales impact from those congressional hearings on unintended acceleration was badly mistaken. Of all the Japanese automakers, Toyota has the most aggressive marketing operation and the deepest financial pockets. Its dealers are just finishing up a company-ordered upgrade of their stores and are anxious to get a return on their investment.

So when Toyota cranked up its incentive spending by more than a quarter, it registered on the sales floor. Even so, Toyota got off cheaply. Its average incentive of $1,833 per car is still only a bit more than half of the $3,300 that Ford (F, Fortune 500) spent, according to Automotive News.

Now Toyota is upping the ante again. Early in March, it said it is offering 0% financing for 60 months, a free two-year maintenance plan, and other incentives. And it will start broadcasting new commercials designed to make customers feel more comfortable buying its cars.

GM responded within hours, announcing its own 0%, 60-month financing program on 2010 products. With customer loyalty a thing of the past, automakers too often find themselves selling the deal instead of the car.

Ford didn't immediately follow suit, though it vowed to remain competitive with the others. The Dearborn automaker was looking unusually strong in February. Besides its perennial best-seller, the F-series pickup truck, its Fusion sedan was the industry's seventh strongest performer, and the Escape crossover was ninth.

Ford has an unusually robust product pipeline, according to research by Bank of America Merrill Lynch -- second only to Hyundai/Kia, as measured by the percent of volume it is replacing. Since customers like new models, that bodes well for the future.

February results also spotlighted two smaller automakers that are clearly on the ascendancy. After years of neglect, Volkswagen is finally making a concerted effort to sell cars in North America, and customers are responding to the opportunity to buy a German nameplate for less-than-luxury-car prices.

Subaru, meanwhile, has some fresh new models in the Outback and Legacy, attractive mainstream designs, and the added feature of all wheel drive across its model line.

What all this churning in the marketplace means for the rest of the year is hard to say. Ford may be coasting right now, but it will have to remain responsive to the two battleships maneuvering beneath it.

Driven by CEO Whitacre, GM is clearly operating under a mandate to boost unit sales and revenue. Nearly a third of its February sales were made to fleets, with fleet sales expected to rise for the next several months.

For its part, Toyota has made clear that it will compensate for any slackening in consumer confidence by sweetening up its deals. "The promotion for March is unprecedented in the history of Toyota," said division general manager Bob Carter.

Let's just wait and see what April brings. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Find Your Next Car
Company Price Change % Change
Apple Inc 100.53 1.37 1.38%
Bank of America Corp... 15.45 0.00 0.00%
Intel Corp 34.34 -0.07 -0.20%
Microsoft Corp 45.33 0.50 1.12%
Facebook Inc 75.29 0.70 0.94%
Data as of Aug 19
Index Last Change % Change
Dow 16,919.59 80.85 0.48%
Nasdaq 4,527.51 19.20 0.43%
S&P 500 1,981.60 9.86 0.50%
Treasuries 2.41 0.02 0.75%
Data as of 3:30am ET

Sections

Two months after Dov Charney was fired as CEO, he's still at the company, collecting his full base salary amid early signs of a turnaround. More

Small business owners say the economy is still their biggest challenge, which keeps them from expanding and hiring, according to a CNNMoney-Manta survey. More

Small business owners say the economy is still their biggest challenge, which keeps them from expanding and hiring, according to a CNNMoney-Manta survey. More

When hairdresser Mark Bustos isn't cutting the hair of fashion designers and real estate moguls, he's traveling around the world giving free haircuts to the homeless. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.