June domestic car sales were a disappointment. GM (NYSE: GM) and Ford’s (NYSE: F) results were particularly tepid. GM’s sales were up 10.6% to 215,335. That was below its 17.1% growth Ford’s sales rose 13.3% in June to 193,415. That was slightly better than its first half improvement of 12.2%, but still a disappointment for the American car company that led of industry’s recovery.
The firms that are doing well are an improbably pair. One is German car company VW. Its management has acknowledged that without a substantial market share in the US it cannot compete for the position of No.1 car company in the world. That title lurches between Toyota (NYSE: TM), damaged by recalls and the Japan quake,and GM which is only recently back to profitability.
VW cars are mostly compacts. They have started to get good reviews in the US automotive press and higher quality marks by research firms like JD Power. VWs sales were up 35.1% in June to 28, 444. That puts it behind nearly a dozen other manufacturers in sales, but at least its sales are moving higher quickly. VW management still has to decide whether to launch a complete car line in America with selections at least as broad as Chrysler’s It can count on Porsche, which it will soon own, for a proxy in the luxury market. But, the high end brand sold only 2,546 cars and light trucks in the US last month which makes its activities insignificant compared with BMW or Mercedes.
The other clear winners in June were the two Korean car companies which have a common owner–Kia and Hyundai. Kia has taken part of Honda’s (NYSE: HMC) and Nissan’s position as the low-priced cars with moderate quality ratings. Kia sold 45, 044 cars in June, higher than last year by 41.2%. Stable mate Hyundai, which has entered both the mid-market and up-market with some force, sold 59.209 cars, higher by 15.6%. Their combined unit sales of nearly 100,000 puts the two ahead of Nissan and Honda and only slightly behind Chrysler which sold 120,000 cars and light trucks.
Sales of vehicles in the US market will be less than forecast by most of the companies at the beginning of the year, and could fall as low as 12.5 million. Total US sales in the first half were 6.3 million. That is not enough to accommodate the financial needs of all the major participants, many of which are only now able to run profitable operations.
Douglas A. McIntyre