Toyota U.S. sales reel from crisis; GM, Ford surge

03/02/2010 - 0:16

By David Bailey and Kevin Krolicki

DETROIT (Reuters) - Toyota Motor Corp sales dropped 16 percent in January as the automaker reeled from a massive recall and rivals Ford Motor Co and General Motors Corp surged past it in the U.S. market.

Toyota's U.S. market share fell to its lowest level since January 2006 and its monthly sales dropped below 100,000 vehicles for the first time in more than a decade.

Overall auto sales rose 6 percent from a year earlier, powered by revived purchases by rental car companies which had dropped out of the market a year earlier due to tight credit and concerns about a deepening slump in the economy.

Fears of an extended sales slump pushed Toyota's shares down 3.7 percent in a flat market in Tokyo, compounding a slide that has sent the stock down 17 percent since its recall was announced on January 21.

As Toyota sales spun into reverse, Ford and Hyundai Motor Co emerged as the big winners, each posting 24 percent sales gains.

In one telling benchmark, the Ford brand outsold Toyota, Scion and Lexus on a combined basis. GM's volume-leading Chevrolet brand also topped Toyota on its own.

"Auto sales and market share is kind of like a high-speed road race and if you get caught up in the gravel on the shoulder you can get passed really fast, and essentially that is what happened to Toyota," Autoconomy analyst Erich Merkle said.

"Right now we have to find out how long it is going to take them to get back on pavement again," Merkle said.

Investors in Tokyo were also trying to gauge the long-term impact of the recall, as well as the weight of Toyota's surplus production capacity on profitability.

"The possibility that the impact will last two to three years is low, but that doesn't mean we're rushing in to buy Toyota now -- there are too many unknowns," said Akihiro Tsunoda, senior investment manager at Sompo Japan Asset Management.

Toyota's weak sales report came as U.S. Transportation Secretary Ray LaHood took a harder line with the automaker for what he said was a slow response to safety complaints.

"We're not finished with Toyota," LaHood said in an emailed statement to Reuters.

U.S. government officials said Toyota could face both an unusual civil penalty because of the recall and an expanded probe that would focus on electric controls. Either development could further damage the Japanese automaker's reputation for quality and cast a shadow over its results.

Toyota said its U.S. sales had been meeting company projections until the last week of January when it was forced to take the unprecedented action of turning away customers for many of its best-selling vehicles.

Eight of Toyota's 19 models -- about 60 percent of the carmaker's U.S. inventory -- could not be sold because of faulty accelerators during the crucial last week of the month, the peak time for auto sales.

That cost Toyota almost 20,000 sales of cars and light trucks, executives estimated. That would represent more than $500 million in lost revenue during the last week of January based on average vehicle sale prices.

In addition, Toyota faces costs of $250 million for its first set of repairs under recall. The total cost of the recall would easily top $1 billion to Toyota and could deepen in the weeks ahead, analysts have said.

NISSAN, GM SALES UP

Nissan Motor Co appeared to benefit from Toyota's woes as its sales rose 16 percent. GM's rose 14 percent.

Honda Motor Co, which made a point of not following its rivals in targeting Toyota customers, saw its sales drop 5 percent.

Chrysler, still the industry's weakest player, posted a sales drop of 8 percent. Chrysler, now controlled by Fiat SpA, has seen sales fall for 25 consecutive months.

Ford's U.S. market share ticked up to 16 percent in January. Toyota, which had 17 percent market share in 2009, saw its share fall to just above 14 percent.

Toyota's U.S. brand chief, Bob Carter, said sales for Toyota models outside the recall appeared to have dodged the fallout from the safety action but cautioned that that could change. "I'm not underestimating the confusion," he said.

Ford shares ended the day more than 2.4 percent higher. The stock has posted an eight-fold gain over the past year.

"We consider Ford as one of the companies best-positioned to benefit from Toyota's tribulations but see others looking to gain too," Standard & Poor's equity analyst Efraim Levy said.

A major factor behind Ford's gain was that sales to fleet operators including rental companies more than doubled, accounting for about 37 percent of its overall sales.

Retail sales through Ford showrooms were down 5 percent, in line with what analysts and executives have said was a slow month for an industry still facing an unsteady recovery.

"We should not expect the road to recovery to be smooth," said Ford economist Emily Kolinski Morris.

GM's results were also buoyed by fleet sales, which rose to 29 percent of total sales, from 25 percent last year.

Partly as a result, GM's U.S. market share jumped to almost 21 percent, from 15 percent a year earlier when the automaker had been hit by consumer concern about its U.S. government bailout.

But GM pointed to success in reducing sales incentives and increasing prices as a sign of progress in a turnaround it expects will put it on track for an IPO later this year.

"We're earning share, not buying it, getting off the incentive drug," GM U.S. sales and marketing chief Susan Docherty said.

She added: "Our dealers tell us they are seeing more Toyota owners and customers in their stores than what they have seen in the past."

Industry-wide sales were 10.78 million vehicles in January on an annualized basis, according to industry-tracking service Autodata. GM said it expected Toyota's troubles had cut 200,000 vehicles from that annualized sales rate.

Sales had been 9.6 million a year earlier and 11.2 million in December, when showroom traffic was supported by year-end incentives and an expiring tax credit.

Analysts expect 2010 sales in the U.S. market -- now the second-largest vehicle market behind China -- to recover above 11 million sales compared with a 27-year-low of 10.4 million unit sales in 2009.