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Ford, GM expect better sales in 2012 for two good reasons

Ford and GM expect sales in 2012 to even outperform the 12.5 to 13.5 million predicted this year, due to the number of aging cars in the nation and the increasing expense of keeping older cars running.
Posted: October 21, 2011 - 2:47AM
Author: Don Bain

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We see growth in 2012 for one reason – vehicles are getting very, very old," Ford senior economist C. Jenny Lin said Wednesday at a gathering hosted by the National Association of Manufacturers, according to a story by David Shepardson of the Detroit News Washington Bureau. "We are still very positive about the U.S. auto industry recovery."

The average age of the typical U.S. vehicle is now10.6 years, the highest level ever and are thinking that those who have been holding off are ready to give in and buy a new car.

U.S. auto sales totaled 96 million vehicles from 1996 to 2000, Linn remarked, noting those cars and trucks are nearing the end of their usefulness – that the hankering for something newer is returning.

"A lot of people are deciding whether to repair their old vehicle — and the costs are getting higher," she said. "It's tradeoff mode."

G. Mustafa Mohatarem, chief economist for GM also foresees a brighter 2012, but his boss, GM Chairman and CEO Dan Akerson, doesn’t agree with him. Akerson reportedly told Automotive News last week he expects flat U.S. sales next year.

Auto sales climbed 10 percent last month bringing the annual sales rate to 13.1 million vehicles. Mohatarem believes sales are growing not because of higher demand, but because Japanese production was greatly impacted by March's natural disaster. They are recovering — albeit slowly. "We didn't have the supply to the meet the demand," he said.

Notably, the Nissan Altima bumped off the Accord as the number two best selling car in the U.S. last month, only 495 units behind the long ruling Toyota Camry.

"The shocker to me has been Honda," he said, which "still has not been able to get its production up," he added. "Toyota claims it is up, but we have some evidence that even they're struggling."

Another factor buoying sales of U.S. makes is the weakening value of the dollar to compared to the Euro – it is making U.S. cars gain value when compared to the European makes.

Mohatarem said based on U.S. population, the auto industry should be selling 16.5 million vehicles annually. "Thirteen million is a deep-recession sales low," he said, but added the U.S. could return to the 16 million range in 2014 or 2015.

However you see 2012 developing, we’ll close with this quote: “It’s been a slow turning, from the inside out.” –John Hiatt

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