By Mike Ramsey
July 16 (Bloomberg) -- U.S. auto sales probably will rise to an annual rate of more than 10 million in this year’s second half as fleet operators finally replace their aging vehicles, helping to revive production, analysts said.
“There will be a more normal replacement cycle that is going to allow commercial fleets, government and rental-car companies to swap out existing fleets,” said Maryann Keller, an auto-industry consultant and a director of Dollar Thrifty Automotive Group Inc., in a July 14 interview. “Purchases in the first half were abnormally low by historical standards.”
Fleet purchases, along with the federal government’s “cash for clunkers” program to encourage people to replace older, less fuel-efficient vehicles, may push the annual rate to more than 9.9 million, the highest in any month so far this year. Sales of cars and light trucks in 2008 totaled 13.2 million, and averaged more than 16 million a year during this decade.
General Motors Co. and Chrysler Group LCC, which both exited bankruptcy in the past five weeks, need a 10 million annual pace to break even, according to the U.S. government.
Fleet sales can account for as many as 3 million vehicles annually, said Keller, who is based in Stamford, Connecticut. They probably won’t reach that level this year, as corporate buyers and rental-car companies keep vehicles longer, she said.
Automakers, shippers, metal producers and economists all anticipate vehicle production will rise in 2009’s second half, That would be the first time that more vehicles were built in the second half of a year than in the first six months since 1991, when the U.S. economy was in a recession, according to data from IHS Global Insight Inc. in Lexington, Massachusetts.
Keeping Vehicles
Rental-car companies such as Hertz Global Holdings Inc. and Dollar Thrifty have been keeping vehicles longer. Most of them shifted from “program” vehicles that they buy, keep for six months and resell to manufacturers to “risk” vehicles that are purchased outright, used for at least 15 months and sold to auto dealers, Keller said.
That contributed to a drop in fleet sales and now those cars and trucks need to be replaced, she said.
Hertz bought 16,000 new vehicles during the six weeks before June 25 as demand for car rentals rose, Chief Executive Officer Mark Frissora told analysts on a conference call that day. The company will keep acquiring new vehicles and shifting out older ones, he said.
Rising prices for used cars also are giving fleet operators an incentive to give up older vehicles and buy new ones, Keller said. Manheim Consulting said last week that U.S. used-vehicle prices rose in June for a sixth straight month. Manheim’s index, based on wholesale prices at auctions, reached 114.1 last month after ending 2008 at 98.
Spurring Production
Demand from rental-car companies and low inventory at some automakers will spur production, said Mike Robinet, an analyst at CSM Worldwide in Northville, Michigan. U.S. auto dealers have 1 million fewer vehicles on their lots now than they did in January, he said.
The cash for clunkers program, which provides incentives of as much as $4,500 to trade in an old vehicle, may motivate some buyers, Robinet said.
GM and Chrysler are bringing back production after idling output at many plants for several weeks as they reorganized in bankruptcy. Chrysler emerged June 10 after 42 days and GM on July 10 after 39 days.
Other automakers such as Honda Motor Co. and Toyota Motor Corp. also cut production.
Ford Motor Co., the only U.S. automaker to forgo emergency government aid, plans to boost third-quarter output in North America by 16 percent.
Ford fell 7 cents to $5.98 at 10 a.m. in New York Stock Exchange composite trading. Hertz declined 1 cent to $8.85, while Dollar Thrifty was unchanged at $16.05.
Increase Expected
U.S. auto production may rise to 3.26 million vehicles in the year’s second half from 2.2 million in the first six months, Global Insight said. The industry built 8.5 million vehicles in all of 2008 and 10.5 million the previous year.
Ford’s low-end estimate for U.S. industry sales for the year is 10.2 million, which would mean an annual pace of almost 11 million during the rest of 2009, said George Pipas, an analyst for the Dearborn, Michigan-based company.
CSX Corp., the third-largest U.S. railroad, said this week that automotive shipments would contribute to a second-half increase in freight. Alcoa Inc., the nation’s biggest aluminum producer, last week predicted that U.S. vehicle production would rise by 1 million in the final six months from the first half.
Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, is among those projecting that automakers will crank up production to meet demand spurred by the cash for clunkers program. A rebound in the industry’s output will help pull the economy out of the recession, leading to economic growth of 3 percent in the second half, he said.
To contact the reporter on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net Last Updated: July 16, 2009 10:01 EDT
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July 16 (Bloomberg) -- U.S. auto sales probably will rise to an annual rate of more than 10 million in this year’s second half as fleet operators finally replace their aging vehicles, helping to revive production, analysts said.
“There will be a more normal replacement cycle that is going to allow commercial fleets, government and rental-car companies to swap out existing fleets,” said Maryann Keller, an auto-industry consultant and a director of Dollar Thrifty Automotive Group Inc., in a July 14 interview. “Purchases in the first half were abnormally low by historical standards.”
Fleet purchases, along with the federal government’s “cash for clunkers” program to encourage people to replace older, less fuel-efficient vehicles, may push the annual rate to more than 9.9 million, the highest in any month so far this year. Sales of cars and light trucks in 2008 totaled 13.2 million, and averaged more than 16 million a year during this decade.
General Motors Co. and Chrysler Group LCC, which both exited bankruptcy in the past five weeks, need a 10 million annual pace to break even, according to the U.S. government.
Fleet sales can account for as many as 3 million vehicles annually, said Keller, who is based in Stamford, Connecticut. They probably won’t reach that level this year, as corporate buyers and rental-car companies keep vehicles longer, she said.
Automakers, shippers, metal producers and economists all anticipate vehicle production will rise in 2009’s second half, That would be the first time that more vehicles were built in the second half of a year than in the first six months since 1991, when the U.S. economy was in a recession, according to data from IHS Global Insight Inc. in Lexington, Massachusetts.
Keeping Vehicles
Rental-car companies such as Hertz Global Holdings Inc. and Dollar Thrifty have been keeping vehicles longer. Most of them shifted from “program” vehicles that they buy, keep for six months and resell to manufacturers to “risk” vehicles that are purchased outright, used for at least 15 months and sold to auto dealers, Keller said.
That contributed to a drop in fleet sales and now those cars and trucks need to be replaced, she said.
Hertz bought 16,000 new vehicles during the six weeks before June 25 as demand for car rentals rose, Chief Executive Officer Mark Frissora told analysts on a conference call that day. The company will keep acquiring new vehicles and shifting out older ones, he said.
Rising prices for used cars also are giving fleet operators an incentive to give up older vehicles and buy new ones, Keller said. Manheim Consulting said last week that U.S. used-vehicle prices rose in June for a sixth straight month. Manheim’s index, based on wholesale prices at auctions, reached 114.1 last month after ending 2008 at 98.
Spurring Production
Demand from rental-car companies and low inventory at some automakers will spur production, said Mike Robinet, an analyst at CSM Worldwide in Northville, Michigan. U.S. auto dealers have 1 million fewer vehicles on their lots now than they did in January, he said.
The cash for clunkers program, which provides incentives of as much as $4,500 to trade in an old vehicle, may motivate some buyers, Robinet said.
GM and Chrysler are bringing back production after idling output at many plants for several weeks as they reorganized in bankruptcy. Chrysler emerged June 10 after 42 days and GM on July 10 after 39 days.
Other automakers such as Honda Motor Co. and Toyota Motor Corp. also cut production.
Ford Motor Co., the only U.S. automaker to forgo emergency government aid, plans to boost third-quarter output in North America by 16 percent.
Ford fell 7 cents to $5.98 at 10 a.m. in New York Stock Exchange composite trading. Hertz declined 1 cent to $8.85, while Dollar Thrifty was unchanged at $16.05.
Increase Expected
U.S. auto production may rise to 3.26 million vehicles in the year’s second half from 2.2 million in the first six months, Global Insight said. The industry built 8.5 million vehicles in all of 2008 and 10.5 million the previous year.
Ford’s low-end estimate for U.S. industry sales for the year is 10.2 million, which would mean an annual pace of almost 11 million during the rest of 2009, said George Pipas, an analyst for the Dearborn, Michigan-based company.
CSX Corp., the third-largest U.S. railroad, said this week that automotive shipments would contribute to a second-half increase in freight. Alcoa Inc., the nation’s biggest aluminum producer, last week predicted that U.S. vehicle production would rise by 1 million in the final six months from the first half.
Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, is among those projecting that automakers will crank up production to meet demand spurred by the cash for clunkers program. A rebound in the industry’s output will help pull the economy out of the recession, leading to economic growth of 3 percent in the second half, he said.
To contact the reporter on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net Last Updated: July 16, 2009 10:01 EDT
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