Auto Sales: Paris and Ford

http://www.nytimes.com/2010/10/02/business/02auto.html?ref=business

http://www.nytimes.com/2010/10/03/automobiles/BMW-PARIS.html


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"Nobody wants to be sold, but everyone wants to be helped." (John C. Maxwell)

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The place to be this week has been Paris. This has been more than the annual "Paris Auto Show." It's been more like what cars are going to sell and where will they be selling?

Ford has continued its incredible comeback with a 46% increase over prior year for September. And, Ford had had a good month in September of 2009 so those numbers are real. Ford paced the overall U.S. auto market which gained 28.5% from a year ago.

Ford's market share has improved for the 23rd month in the last 24.

Alan Mulally (Ford's CEO) was quoted in Paris as indicating that Ford's net debt will be zero by the end of 2011. Since Ford borrowed over $23 billion at the end of 2006 (mortgaging everything they had, including the "Ford" logo) after years of net losses, the industry has watched Mulally turn around Ford without declaring bankruptcy or taking money from the taxpayers.

Mulally expects the U.S. car market to grow at a pace of 3 to 5% in the future while he sees the global market expanding by 5 to 10%. Ford has regained its number 2 position in U.S. market share at 16.7% (GM is #1 at 18%, Toyota is #3 at 15.3%).

The U.S. auto industry's seasonally adjusted annualized selling rate for September was 11.76 million cars (the highest level this year). That rate was 9.38 million a year ago. But relatively slow sales in the first half of the year mean total sales for the industry in 2010 are expected to be around 11.5 million. That compares with 10.4 million in 2009 and more than 17 million in 2005.

Our question: will the U.S. auto market ever get back to 17 million cars sold?

Back to Paris. China's auto market (where reports had total sales there last year well beyond 17 million autos) appears to be headed for a leap beyond diesel. Europe is used to diesel and is receptive to the new refined versions of those engines. According to BMW's head of sales, China may skip diesel cars all together and move directly to gasoline-electric hybrid vehicles. Because Beijing limits sales of diesel fuel to trucks, Chinese consumers, unlike Europeans, have never gotten used to the idea that diesel is more economical than gasoline.

BMW's goal for China is to be the top luxury carmaker. Last year, they sold 90,000 cars there and their forecast for 2010 is to sell as many as 120,000. Their brands there include the "Mini" and, of course, Rolls Royce.

BMW is not ignoring the U.S. market. They've invested $750 million in their Spartanburg, South Carolina facility to produce the new X3 luxury crossover, which was rolled out in Paris.

The BMW sales perspective is key: despite the weakness of volume automakers in mature markets, the global luxury sector is holding up well. This is not just true for cars, "... it's true for handbags and hotels too."

Paris is a great place to hear positive news about the U.S. car market and especially Ford, where the comeback has been amazing and free of government bailouts.