Toyota And Ford Signal Auto Sales Recovery Into 2011

Toyota Motor (NYSE: TM) posted mediocre results for its fiscal third quarter which ended on December 31, and the nine months which ended on the same day.

The world’s largest car company also increased sales forecasts for the balance of the year. The firm commented that “Reflecting these results, TMC revised its consolidated vehicle sales for the full fiscal year ending March 31, 2011 from 7.41 million to 7.48 million units, an increase of 70 thousand units from TMC’s forecast announced in November 2010.”

Last week, Ford Motor (NYSE: F) said it would increase its first quarter 2011 production by 13%.  The No.2 US car firm said, “The estimated increase of production on this year’s first quarter would involve the creation of about 555,000 vehicles.  As a part of this, Ford is looking for the possibility of adding a third shift to its factories that are currently working in two shifts with workers that are working overtime.”

There has been a lingering concern that strong global 2010 car and light vehicle sales would fizzle in 2011. The global recession, lack of easy consumer credit, and persistent unemployment were all expected to stymie sales.  So far, the conventional wisdom is wrong.   The most important confirmation of this will be if GM (NYSE: GM), which has a large market share in the US and China, also increases production forecasts.

Car sales are an imperfect indicator of consumer confidence.  Cars and light vehicles are still kept by consumers longer than they were historically. A combination of the need to replace aged vehicles and the financial ability to do so is a positive sign for a broad economic recovery.

Cars are not appliances or lawn mowers. One big purchase may actually undermine several smaller ones. It is impossible to say whether the typical household can afford a new car and a new washing machine. It may be that people cannot stretch that far and the purchases of modestly priced household items may remain weak.

Car sales are rising in the meantime. The result is an increase in jobs. The US manufacturing sector is still moribund, but there are signs of slight pulse.

Douglas A. McIntyre