U.S. Automakers Getting Back on Track at Just the Right Time
Just two years after two of the "Big Three" U.S. automakers declared bankruptcy, Detroit's favorite sons have grown strong enough to steal sales back from their Japanese rivals. For the month of September, sales for General Motors Co. (NYSE: GM ) were up 20%, sales for Ford Motor Co. (NYSE: F ) were up 9% and sales for Chrysler Group LLC were up 27%. Meanwhile, sales for Toyota Motor Corp. (NYSE ADR: TM ) plunged 17.5% and Honda Motor Co. Ltd. (NYSE ADR: HMC ) fell 8%. It's quite a reversal from the late 2008-09 period, when both GM and Chrysler declared bankruptcy and took government bailout money to keep from closing their doors. Toyota at that time took the crown of world's largest automaker from GM. And the U.S. auto industry collectively shed 120,000 jobs. "The image change for Detroit in the last three years probably has been more than any of us in the industry anticipated," Jesse Toprak , vice president for industry trends and analysis at TrueCar.com, told USA Today . The Japanese automakers lost market share this year as they were pounded by the devastating earthquake and tsunami that rocked the island nation in March . Disruptions to manufacturing have caused lapses in inventory that have hurt sales. However, the American automakers have taken full advantage of the opportunity to get car buyers to give them a chance. Both GM and Chrysler picked up 1.7 market share points in September compared to the previous year, while Honda lost 1.7 points and Toyota lost 3.8 points. Jeff Schuster, executive director of global forecasting and analysts for J.D. Power and Associates, thinks that the Japanese automakers may find it hard to win back those lost customers. "[The March earthquake] created a more open environment coming out of the recession," Schuster told Bloomberg Businessweek . "I think buyers are more open to looking at other brands now." Advantage Detroit Several factors are working in favor of the U.S. automakers now that they've regained their financial footing. To continue reading, please click here.. .
Just two years after two of the "Big Three" U.S. automakers declared bankruptcy, Detroit's favorite sons have grown strong enough to steal sales back from their Japanese rivals.

For the month of September, sales for General Motors Co. (NYSE: GM) were up 20%, sales for Ford Motor Co. (NYSE: F) were up 9% and sales for Chrysler Group LLC were up 27%.

Meanwhile, sales for Toyota Motor Corp. (NYSE ADR: TM) plunged 17.5% and Honda Motor Co. Ltd. (NYSE ADR: HMC) fell 8%.

It's quite a reversal from the late 2008-09 period, when both GM and Chrysler declared bankruptcy and took government bailout money to keep from closing their doors. Toyota at that time took the crown of world's largest automaker from GM. And the U.S. auto industry collectively shed 120,000 jobs.

"The image change for Detroit in the last three years probably has been more than any of us in the industry anticipated," Jesse Toprak,vice president for industry trends and analysis at TrueCar.com, told USA Today.

The Japanese automakers lost market share this year as they were pounded by the devastating earthquake and tsunami that rocked the island nation in March. Disruptions to manufacturing have caused lapses in inventory that have hurt sales.

However, the American automakers have taken full advantage of the opportunity to get car buyers to give them a chance.

Both GM and Chrysler picked up 1.7 market share points in September compared to the previous year, while Honda lost 1.7 points and Toyota lost 3.8 points.

Jeff Schuster, executive director of global forecasting and analysts for J.D. Power and Associates, thinks that the Japanese automakers may find it hard to win back those lost customers.

"[The March earthquake] created a more open environment coming out of the recession," Schuster told Bloomberg Businessweek. "I think buyers are more open to looking at other brands now."

Advantage Detroit Several factors are working in favor of the U.S. automakers now that they've regained their financial footing.

One big advantage that had helped the Japanese manufacturers take an ever-growing chunk of the U.S. market was the perceived difference in quality between their cars and those built by the Big Three. That is no longer the case.

"The real quality gaps between domestics and imports have almost vanished," said Toprak, noting that Chrysler's remodeled 300 sedan earned high praise in the November issue of Consumer Reports.

Meanwhile, a series of embarrassing recalls has bruised the reputation of Toyota, long considered among the world's most reliable automakers.

"Quality is now a given," Jefferies Group Inc. (NYSE: JEF) analyst Peter Nesvold wrote in a note to clients. "Toyota's historical reputation for quality was no longer the differentiating factor that it had been for many years."

The decline in gas prices in recent months - the average price for a gallon of regular has fell to $3.41 last week from $4 in May - also has boosted sales of trucks and SUVs. People tend to prefer U.S. models of those types of autos.

In fact, sales of trucks and SUVs were the primary drivers of September's positive sales numbers. GM's truck and SUV sales were up 34%, while Chrysler's were up 35% and Ford's 24%.

Chrysler and GM also reaped the benefit of having introduced several new or refurbished models, which helped lure car shoppers into showrooms.

U.S. Auto Sales Rising The resurgence in market share for the Big Three couldn't come at a better time. Despite the ailing economy, people have started buying cars again, and now they are in a position to reap the maximum benefit.

U.S. auto sales were up 9.9% in September from the same month last year. And many industry analysts see that trend continuing.

Schuster said U.S. auto sales could rise from 12.6 million this year to 16.5 million in 2015, a figure last reached in 2006. The September uptick works out to an annualized sales rate of 13.1 million vehicles.

Much of that demand is coming from people who have no choice but to replace their aging vehicle. The average car in America is 11 years old, two years higher than it was in 2007.

"Right now, pent-up demand is keeping this nice, steady growth going," Don Johnson, vice president of U.S. sales at GM, told the Detroit News.

Higher auto sales for the Big Three should also translate into healthier stock prices.

GM is projected to increase profits by 27% over 2010, and Ford should see a 16% increase, according to Bloomberg analysts. Chrysler is now majority owned by Fiat S.p.A. (PINK ADR: FIATY) and no longer reports its profits separately.

"There are a lot of metrics in this sector that your value investor would look at and say "Wow, that's pretty cheap,'" Dennis Wassung, who helps oversee about $500 million at Cabot Money Management Inc., told Bloomberg.

The brightening sales picture for the U.S. automakers has come as a welcome surprise, and is expected to keep improving.

"They're in a much stronger position than we thought they would be at this point, ahead of an influx of new vehicles over the next few years," Schuster said.

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