December auto sales raise hopes for 2011

NEW YORK (CNNMoney) -- Most automakers ended a challenging 2010 with a strong sales month, raising hopes that the industry could be carrying some momentum into the new year.

American automakers General Motors, Ford Motor and Chrysler Group all posted solid gains that met or topped forecasts. Ford's gains in 2010 allowed it to recapture the position of No. 2 automaker in U.S. sales, trailing only GM, for the first time since 2006, reclaiming the spot from Toyota Motor.

Korean automaker Hyundai Motor Co., which operates the Hyundai and Kia brands in the United States, continued to make gains in the U.S. market, and Japanese automakers Honda and Nissan both ended the year with strong sales.

The one major automaker bucking the positive trend was Toyota, which posted a decline in sales for both December and the full year, as it continued to suffer from the hangover of its recall problems earlier in the year.

But despite Toyota's weakness, the strong December was cause for a lot of optimism across the industry on Tuesday.

"It's getting things off on the right foot in 2011. The recovery is real this time," said Jeff Schuster, executive director of forecasting at J.D. Power & Associates.

Industrywide, U.S. sales rose 11% in December, a sales pace equal to 12.6 million vehicles when seasonal factors are taken into account, according to sales tracker Autodata. The full-year number wasn't quite that strong -- 11.6 million vehicles, also up 11%. But the December result capped the best quarter for U.S. auto sales since the third quarter of 2008, the period that ended with the meltdown in global financial markets.

Still the strong sales at the end of the year left 2010 as the second-lowest sales total since 1982, demonstrating how much the recession hurt the U.S. auto industry.

Strong December for GM: GM's U.S. sales rose 8% in December from a year earlier, the company's best sales month of the year.

But gains were limited compared to a year ago, when GM was still selling a significant number of vehicles from its discontinued brands -- Saab, Pontiac, Saturn and Hummer. When excluding those sales, GM's remaining brands of Chevrolet, Buick, GMC and Cadillac posted a 16% gain for the month.

Shares of GM (GM) rose nearly 1.4% following the late-morning report. Its shares are up 14% since its Nov. 17 initial public offering.

GM's full-year sales increased a more modest 6%, which left 2010 as the company's second-worst sales year in decades.

And 2010 was the first year on record that GM's U.S. sales trailed those of another country, as it sold 2.4 million vehicles in China, compared to 2.2 million vehicles sold domestically. That gap is likely to widen in coming years, even if GM hangs onto its title of No. 1 automaker in terms of U.S. sales, as China is projected to enjoy much stronger growth in auto sales.

GM sold its first 326 Volts in the month, its plug-in electric car that got a lot of attention, but is likely to remain a niche vehicle for the foreseeable future. But it easily outpaced its plug-in rival Nissan Leaf, which had only 19 sales in the month.

Ford caps great year. Ford's December sales were up 4% from a year ago, but that comparison was hurt by the fact that it still owned Volvo and Mercury in 2009. Ford has since sold Volvo to Chinese automaker Geely, and announced late last year that it was discontinuing the Mercury brand. Sales of cars and light trucks at the remaining Ford and Lincoln brands were up 8% in the month.

But full-year sales at Ford (F, Fortune 500) were particularly strong, up 15% to 1.9 million vehicles, even with Volvo and Mercury sales included in the comparison.

"In many respects, 2010 was one of Ford's best years ever," said George Pipas, Ford's director of sales analysis.

Toyota woes continue: Toyota's December sales tumbled 6%. While that was not quite as bad as forecasts, analysts said the result demonstrated that the automaker's recall troubles are not yet behind it.

"The recalls continue to be a black cloud hovering over the brand," said Jesse Toprak, analyst with TrueCar. "When the recall crisis hit early in the year, the thinking was it wouldn't affect them that long. But it's lasted a year, and probably will linger into this year as well."

Toyota's full-year U.S. sales slipped 0.4%, meaning that it lost market share in what is now its largest market for the first time since a more modest decline in 1999.

"With other brands such as Hyundai, Kia and Buick gaining momentum, it's going to be hard for Toyota to regain its sales share with its old stable of products," said Jessica Caldwell, senior analyst with Edmunds.com. "New product is more important than ever as other brands have shown that a comeback is possible if you offer fresh, well-executed new vehicles."

Rebound at Chrysler Group. Chrysler Group, which includes the Chrysler, Dodge and Jeep brands, posted a 16% gain in December, despite the fact that sales of its car models fell by nearly half from a year ago. Strong sales of its light truck models more than made up for the weakness in cars.

The month allowed the automaker, which went through bankruptcy in 2009, to post a 17% rebound in full-year sales, allowing it to stay ahead of Nissan for the No. 5 position in U.S. sales.

"The Jeep brand continues to be the best thing Chrysler has going," said Edmunds.com Senior Analyst Karl Brauer. "There are still too many dogs in the house, such as the Patriot, Compass and Liberty, but the Wrangler and Grand Cherokee have huge brand equity,"

Other import brands make gains. The combined sales at Hyundai and Kia jumped 37% in the month, giving the Korean automaker a 22% rise for the year, leaving it only 2% behind far more established Nissan in terms of U.S. sales. It is a continuation of the strong gains the Koreans have made in the U.S. market over the last three years.

Honda sales rose 21% in the month, as it ended the year with a 7% gain in sales. Nissan posted a 28% December sales gain, giving it a 17% rise in full-year sales.