Auto Outlook: Auto industry still powering U.S. economy

By AL SWANSON, UPI Auto Writer
Auto Outlook: Auto industry still powering U.S. economy
Card are shown at the General Motors area during the Chicago Auto Show at McCormick Place on February 9, 2012 in Chicago. UPI/Brian Kersey | License Photo

In automotive lore, GM President Charles Erwin Wilson famously said: "What's good for General Motors is good for the country."

While that's not exactly what he said 60 years ago, there's no denying the comeback of the U.S. auto industry in 2012 has been a major plus for the economy.


Automakers sold more than 14 million vehicles in the United States last year -- up 13 percent from 2011 -- and Credit Suisse estimates vehicle purchases accounted for around 30 percent of domestic economic growth during the first six months of last year.

GM stock ended the year at $28.83 a share, up 42 percent from 2011, and Ford shares closed at $12.95 a share, up more than 20 percent.

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The industry had its best sales in five years.

General Motors sold nearly 2.6 million vehicles, Ford 2.17 million vehicles, and Chrysler 1.65 million. Dodge led all Chrysler brands with 524,000 vehicles sold thanks to the success of the new Dart compact and Journey SUV.

But Ford saw sales of its luxury Lincoln brand slip 4.1 percent. Lincoln began aggressively promoting its new midsize MKZ cars in December. Toyota sold more than 2 million cars and light trucks.

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Analysts say the auto industry is just getting rolling thanks to pent-up demand. The average age of a passenger car on U.S. roads has topped 11 years old, and those aging vehicles will have to be replaced sooner or later.

"We got some really great performance out of both GM and Ford in 2012," David Kudla, head of Mainstay Capital Management LLC, told The Detroit News. "The sales in North America are just so strong, and we see that expanding even further next year."

Industry watchers at Polk automotive information and marketing solutions in Southfield, Mich., expect U.S. light vehicle registrations to grow 6.6 percent in 2013 to more than 15.3 million cars, SUVs and pickups as automakers introduce 43 new vehicles and redesign 60 others.

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"New launch and refreshed product activity is likely to result in an uptick in registrations as showroom traffic and, in turn, sales tend to increase in the timeframe surrounding new introductions," Polk said in a release.

"Polk expects continued recovery in the industry in 2013 and 2014, a positive sign for the U.S. economy," said Anthony Pratt, Polk's director of forecasting for the Americas. "The auto sector is likely to continue to be one of the key sectors that lead the U.S. economic recovery; however, we don't expect to realize pre-recession levels in the 17 million vehicles range for many years."


Polk forecasts U.S. new light vehicle registrations to hit 15.8 million in 2014 and 16.2 million in 2015. The last time 16 million vehicles were sold in the United States was in 2007.

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GM, Ford and Toyota all are launching redesigned full-size pickup trucks in the next 18 to 24 months, spurred by expected growth in housing and construction. GM, which last introduced an all-new pickup in 2006, last month unveiled redesigned models of its Chevrolet Silverado and GMC Sierra pickups, which reach showrooms in June.

Polk sees continued growth in non-luxury compact crossover vehicles because of increased fuel economy standards and interest by younger buyers but only slight growth for hybrid vehicles, which make up less than 3 percent of all U.S. vehicle sales.

"Recent redesigns of nearly every vehicle in the mid-size segment are forcing more competition and continued growth," said Tom Libby, Polk's lead analyst for North America. "The current array of options for consumers in the market for a new mid-sized vehicle makes it a great time to buy a new car."

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Other positive signs for the auto industry are the relatively weak-but-stable U.S. dollar, low interest rates, higher worker productivity and overall quality improvements.


Honda employees in Marysville, Ohio, recently celebrated production of their 1 millionth Honda for export -- a silver Accord EX-L sedan built in the United States and headed for a buyer in South Korea.

"Quality for the world, made in America, has been an important Honda commitment," Honda President Takanobu Ito said in a message videotaped in Tokyo. Toyota and Germany's BMW also export vehicles made in the United States.

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For the record, what GM's Wilson actually told a congressional hearing in 1953 following his nomination to be defense secretary was he could not conceive of making a decision that would adversely affect GM "because for years I thought what was good for the country was good for General Motors and vice versa."

Car sharing hits prime time

Avis Budget Group is expanding its presence in the car-sharing movement.

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The No. 2 U.S. car rental company, whose advertising says it tries harder, is spending nearly $500 million in cash to acquire Zipcar, a 12-year-old car-sharing company whose third-quarter earnings jumped 15 percent. Avis's third-quarter profit increased 34 percent.

Car sharing is popular in college towns and areas where people may need a vehicle for a few hours. It can be a good deal considering that gasoline and insurance is included. Car rentals usually are more cost effective for a longer period.


Zipcar, headquartered in Cambridge, Mass., has struggled since going public in April 2011 although the number of members sharing cars and paying annual fees has steadily increased to around 767,000. Zipcar has more than 11,000 vehicles in the United States, Canada, Great Britain, Spain and Austria.

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Avis is far larger but says with the acquisition of Zipcar it expects $50 million to $70 million in annual savings by cutting costs in its fleet-life cycle. Rental car companies typically purchase fleet vehicles at significant discounts from manufacturers and sell off their older vehicles into the used car market at a profit.

"We see car sharing as highly complementary to traditional car rental, with rapid growth potential and representing a scalable opportunity for us as a combined company," Avis Chairman and Chief Executive Officer Ronald Nelson said.

Rear visibility rules delayed, again

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Automakers will have to wait awhile longer to find out if backup cameras will be required on new vehicles.

The watchdog National Highway Traffic Safety Administration delayed its deadline to set new rear visibility rules for the fourth time since Congress asked for standards on the issue in 2007. The new standard was supposed to be drafted by February 2011.


"The department remains committed to improving rearview visibility for the nation's fleet and will issue a final rule upon completion of the regulatory review process," NHTSA said in a statement.

Around 100 children less than 5 years of age are killed each year in backup accidents, and about half of those are 1-year or younger.

NHTSA estimated backup cameras would reduce both fatalities and injuries from back-over accidents.

The added cost of a backup camera on a vehicle equipped with a display screen ranges from $58 to $88, while adding both a screen and a camera would cost between $159 and $203 per vehicle.

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