Chrysler May Shine As Car Sales Slow

Car sales will probably slow in August as the economy begins to sputter and people wait to see more of the models which will be launched for the 2011 model year. The trend of rising auto sales has begun to fall apart recently. Edmunds, the car research company, says that annualized U.S.  sales will be no better than 11.8 million. That is not enough to fuel sharply improved profits for domestic car makers.

Edmunds also points out that comparisons to last August are not meaningful because the sales for that period were distorted by the “cash for clunkers” program. That may be true, but August will be a difficult period for the industry nonetheless.

Edmund’s believes that market leaders GM, Honda Motor (NYSE: HMC), and Toyota Motor (NYSE TM) will all suffer sales losses of over 20%–more that the industry average. Ford Motor (NYSE: F) will do better–down 7%. That should not come as a surprise. New models from Ford and the lack of  stigma from bankruptcy that has hurt GM and Chrysler have helped it gain market share all year. Its share is expected to be 15.5% compared to rival Toyota’s 15.7%. But, Ford’s numbers have risen as Toyota’s have fallen-probably hurt by its large recalls.

Chrysler should have an increase in sales in August, as odd as it may seem. The No.3 US car company has lagged the industry for most of the year. Edmunds expects Chrysler’s sales to be up 12%, which would mean it is the only major car company selling vehicles in the US which will have an increase in August compared to last year. That would bring the firm’s market share to 9.6% up from 7.3% last year.

It is difficult to account for the gain in Chrysler’s sales. Some of it may be the law of small numbers. It is easier to show an increase off the very modest sales Chrysler had in August of last year. It sold only 90,000 cars and light trucks that month. Chrysler also does not seem to have benefited from the “cash for clunkers” program because buyers probably switched from used Chrysler cars to other brands. The company was already considered a maker of vehicles that public did not like and people who owned its cars did not want to keep them. That means its sales were not distorted as much by the federal government as were results from other companies

Chrysler has begun a modest turnaround, and its image with the American public may have been modestly repaired. The auto firm’s loss narrowed substantially in the first half of the year. Its very small number of new models, led by new Jeeps, may finally have caught on.

Douglas A. McIntyre