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Imports, Incentives Drive U.S. Auto Sales

Economy: The 0.3% increase in June from last year's record pace points to good things to come in the second half of 2001.


DETROIT — U.S. vehicle sales grew 0.3% in June from a year ago, as rebates and cheap loans overcame the lethargic economy to keep the industry on track for its third-best year ever, industry executives and economists said Tuesday.

General Motors Corp.'s sales in June were down 3% and Ford Motor Co.'s were down 6.6%. Chrysler Group sales were up marginally by 1%. Imported brands for the most part continued strong growth, many of them double-digit for the month, chipping away at the domestics' market share.

For the first six months of the year, the U.S. vehicle market was down 4.6% from last year's blistering pace, which set a record for annual sales. Significantly, the traditional Big Three were down 9%, and imports jumped 5% from January-June of last year.

"The incentives and a better consumer mood have overcome the continuing sluggish economic growth," said Paul Taylor, chief economist for the National Automobile Dealers Assn. "Consumers are spending strongly, but more cautiously, as they weigh higher gasoline prices in their vehicle choice."

GM had another strong month with high-profit truck sales rising 9%, whereas Ford's sales in the key sector fell 0.1% and Chrysler trucks slipped 1.9%. But Ford's embattled Explorer set a sales record for June with its third-best monthly showing, and the Ford F-Series pickup truck, the best-selling vehicle in the country, racked up its best month in its 53-year history.

"The message is, we feel pretty optimistic about the second half of the year" despite the slow economy, said George Pipas, Ford's director of sales analysis.

Vehicle sales, excluding heavy-duty pickup trucks, are running at an annualized rate of about 16.7 million, Pipas said, putting 2001 behind only last year's record level and 1999.

Auto sales, considered a yardstick of consumer confidence, are reported early each month and thus a closely watched barometer of the overall economy.

Buyers were enticed into showrooms with hefty incentives, largely from the American manufacturers, averaging more than $1,800 a vehicle.

Economists at Ford and GM also said they are optimistic, noting the Federal Reserve's interest rate cuts this year and the Bush administration's upcoming income tax cuts and refund.

"The economy is showing some signs of stability, the housing market is buoyant with home sales in May running at close to record pace, consumer confidence has strengthened, and chain-store sales growth is reasonably healthy," said Ford's senior domestic economist Jarlath Costello. "All told, the economy has likely passed the low point in this cycle, and the second half should be stronger than the first half."

Unemployment claims have declined over the last few weeks, oil and gasoline prices are coming off recent highs, stock markets have posted gains since April, and orders for durable goods picked up in May, he said.

Ford's redesigned Explorer, introduced in March, sold 42,833 units, indicating that consumers may be getting over the pall cast over the Explorer because of its involvement in crashes while outfitted with Firestone tires that have been recalled.

But the Explorer's muscle also reflects the heavy incentives Ford has poured into its SUV lineup, especially after sales of GM's new SUVs surged in May. "Ford has been especially generous with SUVs in June," said Bill Seltenheim of Autodata, an industry analysis firm.

GM's strong showing was led by its new line of mid-size SUVs, including the Chevrolet TrailBlazer, GMC Envoy and Oldsmobile Bravada. "They had a tremendous month with their SUVs and pickups," Seltenheim said. "Their new line of SUVs have had a terrific reception."

GM also sees the market this year at about 16.5-million vehicles, a vigorous year by any standard.

"Our results are good to solid," said Paul Ballew, GM's executive director for market and industry analysis. "Our share is stabilizing and we're gaining in key areas where we continue to make inroads," such as the mid-size SUVs and full-size pickups.

DaimlerChrysler's Chrysler Group--the Chrysler, Dodge and Jeep brands--saw overall sales rise 1.4%, with its new Jeep Liberty SUV selling as strongly as the popular PT Cruiser did when it first came on the market, said Gary Dilts, senior vice president for sales.

"Jeep Liberty is proving to be a major success," Dilts said. "Liberty is doing for Jeep dealers what PT Cruiser did for our Chrysler dealers--creating traffic and excitement."

Imports were impressive, surging from a U.S. market share of 32.7% for January-June of 2000 to 37% for the first half of this year, according to Autodata.

Toyota, the top-selling import that is outsold only by the Ford and Chevrolet brands, was up 20.1% and Lexus was up 18%.

"We have the new Prius [sedan], the Sequoia and Highlander [SUVs] all adding incremental sales because we didn't have them last year," said Don Esmond, general manager of the Toyota division.

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