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The State of the Automotive Industry

GM's sales for passenger cars like the 2011 Chevrolet Cruze are up 13 percent.

The automotive industry has gone through a lot of changes in the past few months, and those changes have caused auto sales to dip. The March tsunami and earthquake in Japan led to parts shortages that impacted not only Japanese automakers, but American ones that depend on Japanese suppliers for parts. With fuel-efficient Japanese vehicles in short supply and gas prices reaching $4 a gallon in April and May, finding a good deal on a fuel-sipping affordable small car proved difficult for shoppers in that market. Combined with a tough economy, these factors slowed U.S. car sales in May.

“Automakers said that sales dropped 3.7 percent during the month compared with the period a year earlier,” says the New York Times. “Analysts said the closely watched, seasonally adjusted annual selling rate in May was just 11.8 million vehicles, the lowest level reported since last September.”

While sales have tanked for Japanese automakers like Toyota and Honda, which have seen their sales slide by 33 percent and 23 percent, respectively, American automakers are doing relatively well. Chrysler reported that its May 2011 U.S. sales increased by 10 percent, making it the Detroit native’s best May sales since 2008. Jeep aided that jump with a sales increase of 55 percent compared to May 2010. This report follows Chrysler’s pre-Memorial Day announcement that it repaid the $7.6 billion it borrowed from the U.S. and Canadian governments six years earlier than expected, a move that saved Chrysler about $300 million or more a year in interest payments.

General Motors and Ford don’t have such impressive news to report. According to MarketWatch, GM sales dropped by about 5 percent and Ford sales dropped by about 0.1 percent compared to a year ago.

However, sales for their affordable small cars and compact SUVs increased considerably. “Sales of the Focus rose 31.7% to 22,303 vehicles, while Mustang sales declined 35.4% to 6,607 vehicles,” MarketWatch reports. “Ford’s best-selling F-Series trucks declined 15% to 42,399 vehicles. Escape rose 20.5% to 23,140 units, and Explorer sales more than doubled to 13,318 vehicles.” This news follows an increase in Ford vehicle prices by 0.4 percent in May, or an average of $124 per vehicle because resources such as aluminum, steel, rubber and oil are more expensive. The Los Angeles Times says this is the third time the automaker has increased prices since January 2011. GM reports similar sales gains on its affordable small cars and compact SUVs, and says that passenger car sales increased 13 percent.

The Detroit Three haven’t made a full recovery, but Rob Bloom, senior advisor to the Secretary of the Treasury commends them. USA Today states, “Bloom said that the market share for U.S. automakers is up, that thousands of jobs have been added and that GM, Ford and Chrysler are better equipped for another rough patch if gas prices rise more.” In a weekly address issued May 28, Vice President Joe Biden echoes that statement, saying, “Manufacturing is coming back. And our economy is recovering and it’s gaining traction.”

Looking for an affordable small car? Check out the U.S. News rankings of this year's best cars. Then, look for a great deal on a new car by checking out this month’s best car deals. Also, be sure to follow us on Twitter.

Tags: News, Sales Data

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