Economy Hurts Some Brands, But Others Set Records

The sub-prime mortgage fiasco is hitting the auto industry, with several mass-market brands feeling the pinch of higher interest rates and a slower housing market.

Still, it was also a good month for crossovers--SUVs and so-called "tall wagons" based on car platforms--as well as luxury brands, with European brands and Lexus setting sales records.

Overall, for the month, auto sales improved versus the sluggish July volume, with the seasonally adjusted annual sales rate (SAAR) at 16.2 million in June and July. Observers like Deutsche Bank are estimating the year will finish out at 16 million units, with 16.5 million units for 2008.

While Ford Motor--including Ford-branded vehicles, Mercury, Lincoln as well as Volvo, Land Rover and Jaguar--saw a 14% decline overall, the company got traction from its crossovers, for which sales increased last month by 82%.

General Motors reported a 5% improvement last month--with dealers reporting 388,168 deliveries of new vehicles--versus the month last year, partly from a 24% boost in sales to daily rental fleets.



Toyota Motor Sales, which had enjoyed a long string of record sales gains, saw its eponymous brand lose sales last month versus August last year. Toyota--including Lexus--reported August sales of 233,471 vehicles, a decrease of 2.8% from August 2006.

Jim Lentz, Toyota Motor Sales executive vice president, blamed it on the mortgage conundrum. "Reduced credit tied to the subprime squeeze challenged consumer confidence this month," he said in a company release.

The Toyota division posted August sales of 201,272--down 3.7% from last August. The Lexus division reported best-ever August sales of 32,199 units--an increase of 3.6%. While sales of Toyota cars dropped in August, the RAV4 compact crossover SUV had all-time best-ever August sales of 15,916--up 10.8%.

Similarly, Nissan, which saw sales increase 6%; Kia, which saw a 7% gain; and Hyundai, which had a 1% increase, all got big gains from small and mid-sized crossovers. Hyundai got a 55% increase in sales last month for the re-minted Santa Fe and 13% more sales versus August 2006 for its Tucson compact SUV.

Deutsch Bank says sales will be constrained by the weak housing market, negative equity on trade-ins, higher interest rates and inflationary pressures.

Ford sold 10,165 Ford Edge vehicles and 3,421 of the related Lincoln MKX vehicles. The company also sold 2,939 of its Mercury Mariners, a crossover whose sibling is the Ford Escape compact SUV. But sales of Ford's traditional mid-sized SUVs were down, with Mercury Mountaineer down 2.2% last month and 20.3% for the year; sales of the Explorer SUV dropped 25% last month.

Big haulers like Ford's Expedition were up 16.8% last month, but sales of Ford's F-150 pickup truck slid 10% last month and 12% year-to-date because of pressure in the pickup market from Toyota's new Tundra, and from GM, although both Chevy Silverado and GMC Sierra full-sized trucks saw sales slip around 2% last month.

Toyota saw the market take to the redesigned Tundra pickup, which garnered sales of 18,919--an increase of 69.3% over the month last year, and Nissan achieved 23.6% greater sales last month for its Titan full-sized pickup.

Kia and Hyundai both reported record sales last month--with both reporting their best August ever--as did Honda, which posted a 4.7% increase in sales versus August last year, with the Honda division up 6.7%.

Acura, Honda's luxury division, set records for its MDX and RDX crossovers, Acura sales slid 10%.

Among luxury brands, Mercedes-Benz and Lexus both reported their best August ever, and BMW and Audi also reported gains of 19.3% and 7.1%, respectively. Nissan's Infiniti brand saw an 8.7% boost in sales last month with both the redesigned G sedan and QX56 SUV showing huge gains of 42.3% and 55%, respectively.

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