American automaker's retail market share falls BY SARAH A. WEBSTER FREE PRESS BUSINESS WRITER April 14, 2007 Despite a good start to the year by General Motors Corp., fewer than half of American consumers -- 48.9% -- bought new cars and trucks in the first quarter this year from Detroit automakers, according to retail sales data provided exclusively to the Free Press by the Power Information Network. Retail sales are purchases made directly by consumers in showrooms, and they exclude fleet sales to rental car companies, businesses and governments, which are typically sold in bulk at a discount. Industry experts view retail sales, which represent about three-fourths of the industry's 17 million sales, as one of the best measures of market demand and the future financial performance of automakers, because they are generally more profitable sales. The new low point in Detroit's share of the retail market is the result of a long-term consumer move away from their brands that seems to have picked up speed since September, fueled by a housing market slowdown, high oil prices and shaken consumer confidence. While GM had the strongest quarter among metro Detroit automakers, Ford Motor Co. and DaimlerChrysler AG lost important retail market share to foreign competitors -- led by Toyota Motor Corp., which managed to drop its incentives to below $1,000 per vehicle on average and still snap up a substantial number of new customers. To be sure, this is not the first time that Detroit automakers have dipped below the 50% mark in retail sales. But if the trend continues, this might be the first full year that non-U.S. automakers take the majority of the U.S. auto market. "I think, in the near term, both Chrysler and Ford will continue to lose share, and that aggregate loss will more than offset any possible gain by GM," said Tom Libby, senior director of industry analysis at PIN, a subsidiary of J.D. Power and Associates. "I don't expect the domestics' share to move back up above 50% this year." Still, the performance of GM shows arguable improvement. The world's largest automaker is stabilizing its retail performance, despite slashing its cash-back rebates and other discounts by an average of $500 per vehicle. Automakers don't typically provide detailed information to the public on their retail sales, so PIN compiles estimates with sales information collected from more than 7,000 dealerships, which represent one-fourth of all retail sales. Mark LaNeve, vice president of sales, service and marketing for GM North America, said GM's performance is better than the PIN estimate suggests. LaNeve said retail sales at GM were up half a percentage point in the first quarter. That performance, he said, likely will translate to a nearly flat retail market share because industry-wide retail sales are up an estimated 0.7%. "We know our numbers for a fact," LaNeve said. "It was the first quarterly increase we've had in probably 18 months or so, and we think we held our own in a pretty tough market." Although the numbers at Ford and Chrysler weren't nearly as encouraging, they're not giving up. "It's still very early in the calendar year," Steven Landry, vice president of sales and field operations for the Auburn Hills-based Chrysler Group, said in an interview Thursday. "I think it's presumptuous to think that, as a group, we may finish below 50%." Downward trend Although Detroit could make a comeback, the domestic retail sales performance has been consistently on the decline for some time. In 2005, Detroit's automakers had 54.5% of the retail market. By the end of last year, that had edged down to 50.1%. Now, Detroit is down to 48.9%. That's a 1.2-percentage-point decline from the fourth quarter of 2006, and it's an even larger 2.1-percentage-point decline from the first quarter of last year. These declines, measured to the tenths of a percentage point, might not seem like much. But each point of retail share keeps about one half of an assembly plant running. Libby said even a half of a percentage point is considered an admirable gain in today's marketplace and a full percentage point is like "a huge mountain." And Detroit, despite its best efforts, continues to lose mountains. Behind the power shift Ultimately, sales trends at just two automakers -- Toyota and Ford -- explain most of the power shift this year. While most of the major automakers gained or lost a half percentage point of market share or less, Ford lost a full 1.1 percentage points and Toyota gained 1 percentage point. Those numbers reveal just how tough the situation has become at Ford. That's because the Dearborn-based automaker simultaneously increased its incentives, such as cash-back rebates and other discounts, by 44.6% or $1,342 per vehicle, during the period, to an average of $4,350 per vehicle, according to Autodata Corp. of Woodcliff Lake, N.J. Usually, big discounts such as those encourage consumers to shop and buy more. George Pipas, Ford's top sales analyst, said that Ford's declines, if they continue, could have implications for the company's turnaround plans, which already have called for shuttering 16 plants and eliminating 44,000 jobs. "We know that one of the key assumptions in the Way Forward plan is to stabilize our retail market share," he said. "If we don't, then we maybe haven't gone far enough on our cost reduction." That said, Ford's retail market share numbers provided by PIN include all of the company's six major brands, such as Jaguar, Land Rover and Volvo, all of which have posted sales declines this year. But the company's Way Forward plan is based primarily on Ford's domestic Ford, Mercury and Lincoln brands. Pipas said the number for those three brands has held steady at about 13% of U.S. sales. So that would support Ford Chief Executive Officer Alan Mulally's recent comments to reporters at the New York auto show last week that "we are stabilizing our market share."