Ford posts rare increase as industry gains from clunkers

Ford Motor Co. posted its first U.S. sales increase in 19 months in July and most rivals pared their declines as the federal cash-for-clunkers incentive helped lift industry demand to its highest rate this year.

Subaru and Hyundai-Kia recorded their biggest monthly gains of the year as total industry sales fell 12.2 percent, the smallest drop since May 2008. Percentage declines at other automakers -- including General Motors, Toyota Motor Sales, Chrysler Group and American Honda -- were the lowest for 2009.

The seasonally adjusted annual sales rate climbed to 11.1 million, the highest level since September and topping 10 million for the first time this year. In the last week of July, after the clunkers incentive formally kicked off, the rate may have surpassed 15 million, Ford sales analyst George Pipas said.

"The legs under the economy are not strong enough to sustain a 15 or 16 million sales rate," Pipas said on a conference call. Even if Congress extends the clunkers program, that rate "is not sustainable, particularly as unemployment continues to grow," he said. "This is still a very fragile situation."

Focus, Fusion

Small cars and Ford's most fuel-efficient trucks paced the gain. Sales of the Focus were up 44 percent, and Fusion deliveries advanced 66 percent. The Escape SUV, which includes a hybrid version, almost doubled, and the Ranger small pickup rose 65 percent.

The Volkswagen brand's sales edged upward by 0.7 percent. More than 3,300 -- or about 16 percent -- of those deliveries were for the cash-for-clunkers program, the automaker said.

Diesel-powered models made up more than 30 percent of its sales, VW said. A diesel typically delivers fuel economy 20 to 30 percent better than that of a gasoline engine.

The cash-for-clunkers incentive boosted July sales by about 150,000 units and added about 1 million units to the sales rate, said Mike DiGiovanni, GM's executive director of global market and industry analysis, on a call with reporters.

"This will translate into the industry having a good ability for the first time to increase production, which will stem rising unemployment," DiGiovanni said. "Cash for clunkers will jump start the economy."

GM's posted sales decline of 19.4 percent for the month, the first 10 days of which were spent in bankruptcy.

Nissan falls

Nissan said its sales fell 24.6 percent, the steepest decline for any of the seven biggest automakers selling in the United States. That's in comparison to an 8.5 percent gain in July 2008, when it was the only one of the group to advance.

American Honda's sales fell 17.3 percent for the automaker's smallest decline since August. Still, the Honda Civic saw sales increase 3.1 percent, and the CR-V crossover's deliveries rose 9.9 percent.

Honda outperformed many of its competitors in July 2008, seeing sales fall 1.6 percent for a 1.4-percentage-point gain in monthly market share from 2007 levels. Honda benefited when average U.S. gas prices peaked last July at $4.11 per gallon of regular unleaded, according to AAA data.

Daimler AG's sales dropped 24.2 percent for their smallest slide since March. The results included a 44.6 percent slide for the Smart minicar brand, which had also benefited from high gasoline prices last year.

Hyundai-Kia Automotive's 9 percent increase edged out its 8.9 percent January gain as its best this year. An 11.9 percent rise for the Hyundai brand allowed its plant in Montgomery, Ala., to resume a five-day work week after working a shortened schedule since mid-October, the company said.

Toyota posted an 11.4 percent decline, and Chrysler was down 9.4 percent.

Funds running out

The clunkers initiative is close to exhausting its $1 billion in federal funding. The incentive offers vouchers of $3,500 to $4,500 to consumers who trade in qualified gas guzzlers for new vehicles with better fuel economy.

The Obama administration has said it will honor the clunkers program through Tuesday. The U.S. House of Representatives, meanwhile, has already passed a $2 billion extension for cash for clunkers, and the Senate is expected to take up the measure this week.

Dealer Ben Freeland said the clunkers incentive gave his Chevrolet store the best new car month since he bought it in late October as part of Bill Heard Enterprises Inc.'s 14-store bankruptcy liquidation.

"We took a lot of trucks on trade-in for cars, so the program in my mind has done what the plan was for it," Freeland said. "Most of these were sales that were sitting on the sidelines waiting for the program to start, not pull-ahead sales."

Freeland's store sold about 70 new cars in July. About 15 or 20 were cash-for-clunkers sales, he said, adding: "I think it's spurring on the whole market."

By Chrissie Thompson- Automotive News