For a third year, U.S. car sales are in high gear

Article by: JEFF GREEN and CRAIG TRUDELL , Bloomberg News
Updated: May 10, 2012 - 11:08 PM

Automakers are adding factory shifts to meet demand. Sales this year are up 10%.

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Auto workers on the assembly line at a Ford truck plant in Dearborn, Mich. Ford is adding third crews of workers at three factories in Michigan, Illinois and Kentucky and a second shift in its Missouri assembly plant by the third quarter.

Photo: Paul Sancya, Associated Press - Ap

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U.S. auto sales are on pace for the best showing since 2007 and a third straight year of at least 10 percent gains, only the fourth such streak since the Great Depression, as more-confident buyers return to showrooms.

Automakers are adding overnight shifts and cutting workers' vacations to meet demand.

Sales this year may reach 14.3 million cars and light trucks, equal to the first-quarter pace, according to estimates from 14 analysts compiled by Bloomberg. It would be the best full year since 16.1 million in 2007. The same analysts in January were expecting sales this year of 13.6 million before Toyota Motor Corp. and others exceeded projections.

"Even if we stay where we are, it's a pretty good year," said Brian Johnson, an industry analyst at Barclays Capital in Chicago, who is predicting full-year U.S. sales of 14.4 million.

Pent-up demand, an improving economy and loosening credit has spurred the better-than-estimated auto sales and helped General Motors Co., Ford Motor Co. and Chrysler Group to first-quarter profits that beat analysts' forecasts even while deliveries fell in Europe.

First-quarter deliveries in the U.S. ran at the strongest pace since the same months in 2008, when sales started at an annualized rate of 15.4 million before collapsing to a full-year tally of 13.2 million, said Kevin Tynan, a Bloomberg Industries analyst based in Skillman, N.J.

Sales in the U.S. fell to 10.4 million in 2009, the lowest since the end of the 1982 recession. They improved to 11.6 million in 2010 and 12.8 million last year.

"Part of the renaissance is related to the depths of the downturn" that led to the bankruptcies of GM and Chrysler, said Matt Stover, an industry analyst at Guggenheim Partners in New York. "There is pent-up demand and the cyclical indicators, while still weak, are grudgingly positive and improving."

The first quarter also benefited from mild weather and a "rocking" equity market, Stover said. The Dow Jones industrial average rose 8.1 percent and the Standard & Poor's 500 index gained 12 percent in the first three months of the year.

Auto sales in the U.S. increased 10.3 percent through April, matching the previous year's gain after an 11.1 percent jump in 2010, according to Autodata Corp. in Woodcliff Lake, N.J.

The last time auto sales rose more than 10 percent for three or more years was 1971 to 1973, after an 11-month recession, according to data compiled by trade magazine Automotive News. Previous streaks followed the Great Depression and the World War II production halt, according to the data.

GM, Toyota and Ford all have increased their forecasts for full-year industry sales. GM and Toyota see light-vehicle deliveries rising to as much as 14.5 million, while Ford has raised its outlook to as much as 15 million sales including medium- and heavy-duty trucks. The low end of the automakers' previous forecasts was about 13.5 million units.

Stronger-than-estimated demand means U.S. automakers are curtailing annual shutdowns usually scheduled at their assembly plants in the summer months.

Four Chrysler plants in Illinois, Detroit, Ohio and Mexico will skip summer shutdown entirely this year, the company said last week. Two Chrysler plants and 13 Ford factories are shutting down for just one week instead of two.

The changes mean additional output of models spanning automakers' lineups, from Fiat 500 small cars to Ford Explorer and Jeep Grand Cherokee sport-utility vehicles to Ford F-150 and Ram 1500 pickups.

Ford is adding third crews of workers at three factories in Michigan, Illinois and Kentucky and a second shift in its Missouri assembly plant by the third quarter. Those moves will boost production capacity by 400,000 units to 3 million vehicles on an annualized basis, the company has said.