Toyota’s (TM) sales in the US market are supposed to fall and some of its large rivals like Ford (F) and Honda (HMC) are supposed to benefit from customers who will no longer consider buying vehicles from the world’s top car company. February will be the first barometer of whether that theory is right. It is the first full month since Toyota began its recalls. January sales for the Japanese car company dropped 16%.

The car industry may be in a bind which will make Toyota’s problems of little help to its competition. Domestic cars sales have not moved up much from last year’s abysmal level.

Edmunds, the car research company, has a uncany ability to forecast monthly auto sales by brand. Its forecast for February is that Toyota sales will drop 10% from last year, which is not bad considering the firm’s problems with recalls and bad publicity. Toyota’s market share will drop to 12.6% in February, its lowest level since July 2005. Several other large car companies will struggle as well. Edmunds expects Chrysler’s market share to drop from 12.2% in February 2009 to 8.5% this month.

The large car companies that should pick up sales because of Toyota’s problems and because they have added market share before this month are Honda, Nissan, and Ford. But, market share improvements are not nearly as meaningful when the entire industry is in trouble as they are when overall domestic sales are up sharply.

February car sales in the US should be up 14% from last year to 785,000, but last year’s number was among the worst sales months in several decades. The rate of sales this February translate to an annual domestic car sales rate of 10.6 million which is not very much better than 2009.

The American car industry has spent three years, billions of dollars, and cut tens of thousands of jobs so that it can operate profitably. The government has spent nearly $70 billion to support GM and Chrysler through bankruptcies. But, car buyers do not appear to be cooperative. Sales levels of 12 million units a year are still necessary for GM and Chrysler to make much money, or, if their market shares do not improve, any money at all. Even Ford needs a more robust market to have good operating margins in America.

Honda and Nissan have enough of their cost bases outside the US and have cut expenses enough so that if the American market only produces 10.6 million car sales this year that they can make money. But, it is not the kind of money that the market share leaders made four years ago when domestic sales were over 16 million vehicles. Even badly run car manufacturers showed a profit in a year in which sales reach record levels.

The record level of sales is not going to return in the US, ever. People have learned that they can keep their cars longer. Cars are better made. Consumers will not forget the awful economy of the last two years, the eight million people who lost jobs, the destruction of almost all the home equity in the nation, and the difficulty people and small businesses had when they needed credit. Those experiences will stay in the minds of most Americans for years like a deep wound. Cars are expensive and expensive purchases can and should be delayed when possible, consumer will reason.

The large auto companies with the cars that consumers regard highly, particularly Ford and Honda, were supposed to benefit from the economic recovery. Once the Toyota news came out, experts thought the two firms would be helped but the customers who would turn their backs on the world’s largest car company.

It is not clear yet why overall car sales are not at the level of recovery that was expected.  Jessica Caldwell, Director of Industry Analysis at Edmunds.com, said “February sales should have been higher.” The same surprise may well be expressed in March and then well into the year.

Car buyers may be so concerned about the economy that they are not potential buyers at all. The recent consumer sentiment surveys and jobless claims would support that suspicion. Consumers may also believe that the entire car industry is in the midst of a quality crisis and that recalls will reach very high levels this year. Accordingly, people may put off buying new cars until the smoke clears. They can get their old cars repaired and probably spend less than they would if they bought a new car.

Toyota will have very low sales by historic standards in America in 2010, but for whatever reason the balance of the industry, which includes firm’s that should benefit from Toyota’s troubles, won’t be celebrating .

Douglas A. McIntyre

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