Automakers Hope To Rev Up Sales In 2011

December 29, 2010

Tracy Samilton

The best thing that can be said about car sales this year is that they were better than in 2009 -- the worst year for auto sales in three decades.

Roughly 11.5 million Americans bought a new car in 2010, up from 10.4 million last year. But that's still well below the level of sales automakers achieved throughout the past decade.

"The number of vehicles on the road actually declined in two years -- the first time that happened in well, almost recorded automotive history," says George Pipas, the U.S. sales analyst for Ford Motor Co.

During the recession, automakers implemented some austerity measures, and millions of Americans held on to their old cars or waited as long as possible to buy.

Despite having to fight for every sale this year, many automakers made money -- even General Motors. That's primarily the result of the forced crash diet the industry was put on in 2008 when plants were shuttered and workers were laid off.

Erasing Debt, Fiscal Discipline

In the case of Chrysler and GM, massive debt was erased in bankruptcy.

Pipas says Ford wasn't the only one to toe the fiscal line this year. Almost without exception, automakers built only as many cars as needed, and they kept those profit-robbing incentives to a minimum.

"If you would have told me a few years ago that Ford could be profitable in an 11 million-sales year, I would have scoffed," he says. "I would not have been in the camp of believers."

A Tough Year For Toyota

Still, not every car company fared equally well. While Ford, Hyundai and Kia Motors improved their market share this year, GM and Honda's market share slipped.

But Toyota had the biggest fall from grace.

"They had 17 recalls and over several million vehicles, which is a record for them, and that really did a number on their sales for 2010," says Aaron Bragman, an analyst with IHS Automotive.

Reason For Optimism

Overall profits this year were good, and auto companies have reason for optimism in 2011.

Next year, it's likely that car sales will improve by at least 1 million or more. Inventories on dealer lots are already creeping up. In the old days, inventory buildup was a bad sign, Bragman says. But it may be warranted now.

"Especially if we see a good sales season for the Christmas season this year, I think a lot of that positive news could carry over into 2011 and that could start to impact vehicle sales very early on," he says.

The Housing Market's Impact

But that doesn't mean a full recovery is ahead. As long as the housing market is dismal and unemployment remains high, car sales will undoubtedly suffer.

Meanwhile, automakers are preparing to kick off 2011 with the traditional bang at the Detroit Auto Show. They're hoping that thousands of consumers will see something they really like -- maybe enough to persuade them to trade in their old clunker for a new, shiny model. Copyright 2010 Michigan Radio. To see more, visit http://michiganradio.org/.