Members of Landers Chrysler Dodge Jeep's sales staff in Southaven, Miss., recently performed a walk-a-round on new cars to maintain familiarity with their product

Stan Carroll, Associated Press

Auto industry is on road to recovery

  • Article by: KATY READ
  • Star Tribune
  • March 8, 2012 - 12:24 PM

Emboldened by an improving economy and easier access to credit, more Americans lately appear ready to start breathing in that new-car smell.

The auto industry finished 2011 on a high note, bringing the year's U.S. sales of new cars and trucks to 12.7 million. Nationally, sales figures remained strong in January, prompting analysts to predict they could reach 13.6 million in 2012 -- the industry's best year since before the recession, though still far below the 16 million or more that was typical during last decade's halcyon years.

Americans bought 913,287 cars and trucks in January, 11.4 percent more than during the same month last year, according to research firm Autodata. Sales were up in almost all vehicle categories, particularly small and mid-size cars, which increased 21 and 26 percent, respectively. One notable exception was large cars, whose sales were down 83.5 percent compared to the previous January.

"We're very bullish," said Brad Akers, Twin Cities regional manager for Ford Lincoln Parts, Service and Sales. Akers said his dealers in Minnesota and the Midwest have been exceeding the brand's national average, a success he attributed to stability in local employment and the agricultural economy. It also helps that Midwestern consumers tend to have kept better financial footing, he said. "They didn't overextend to the extent that they did in some parts of the country. People in the Midwest tend to be conservative and safe and smart."

But local dealers gave January mixed reviews. Some say business slowed -- a symptom, at least in some cases, of the atypically warm and snowless winter.

"We prefer to see some snowstorms; they really help," said Tom Brown, a sales manager at Walser Buick GMC in Bloomington. "Obviously people buy four-wheel drives when it snows. As a Buick GMC dealer, a significant portion of our business is trucks. [This year] you could pretty much ride your bike to work."

Michael Stanzak, dealer principal of Key Cadillac in Edina, also said January was challenging, although February showed improvement. "January is typically the worst month of the year, but this year it was much worse," Last January, paradoxically, was good. "We kind of did a flip-flop."

In any case, everyone seems to agree that 2011 ended well. Earlier in the year, cautious consumers were putting off major purchases and the average age of cars on the road climbed to a record 11 years old (though that's partly credited to better built and longer-lasting vehicles).

"We've been seeing people coming in with cars that have 163,000 miles on them, 179,000 miles," Stanzak said.

But when unemployment fell below 9 percent late last year, a three-year low (by January, it had dropped to 8.3 percent), the outlook turned brighter. Recession-weary consumers began to consider parting with those aging vehicles and check out the cool features available in newer cars, such as Bluetooth and navigation systems, said Lacey Plache, chief economist for Edmunds, an industry research firm.

"People corrected their assessment of what was going to happen economically, to themselves personally as well as rest of the U.S.," Plache said. "It's not that we found ourselves in a strong recovery, but things were looking OK. Consumer confidence was way up."

It helped that interest rates remained low while credit loosened up. And that supplies of Japanese cars, scarce for much of 2011 as factories in Japan struggled to recover from the earthquake in March, returned to normal. And that manufacturers offered end-of-the-year incentives.

"The deals weren't particularly better from what people could have gotten earlier in 2011," Plache said. But with the economy improving, "the message was different."

Because owners have hung onto their cars longer than usual, used cars remain in short supply, pushing their prices relatively high. New car purchases generally come with better incentives and interest rates, so many car shoppers do the math and figure they might as well buy new, Plache said.

All these factors make it a good time to buy -- before the recovery strengthens and prices go up, Brown said. "It's very difficult to see a time when it would be more advantageous for you to make that move."

Katy Read • 612-673-4583

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