Crowds check out the new Corvette Stingray at the Detroit auto show at Cobo Center in Detroit. (David Guralnick / Detroit News)
Now that they have taken the wraps off their latest cars and trucks, automakers are turning their attention to the challenges of 2014 and working to tamp down expectations for sales and earnings.
Demand for new vehicles has soared the past three years, particularly in the United States where consumers who held on to aging autos during the Great Recession finally decided it was safe to go back in the showroom. Automakers still expect to sell at least 16 million cars and trucks here this year, but also caution that growth — and earnings — will be more modest than in 2013.
“The last three years of market growth outpacing the economy in North America was somewhat due to pent-up demand,” Yoshimi Inaba, executive chairman of Toyota Motor Sales USA Inc. and executive adviser to Toyota Motor Corp., told The Detroit News Wednesday. “We have become a little more cautious about 2014.”
At the same time, Inaba said that 16 million sales is “still respectable” and shows the industry is “back to normal.” Sales of light vehicles peaked at 17.4 million in 2000 before falling to 10.4 million in 2009.
General Motors Co. predicts sales for the U.S. industry to be between 16 and 16.5 million this year and expects to achieve a “modest” market share gain here. The company said Wednesday it expects its earnings before interest and taxes to be “modestly improved” in 2014 as it betters its operating performance, even with increased restructuring costs.
GM President Dan Ammann, speaking at the Deutsche Bank 2014 Global Auto Industry Conference, said GM’s adjusted margins this year will be similar to 2013 and that overall market share would be “flat to slightly up.”
GM expects restructuring costs to total about $1.1 billion in 2014, a figure Ammann told reporters on a call Wednesday he expects will drop significantly in 2015. Ammann said restructuring costsin 2014 include expenses for closing GM’s Bochum plant in Germany and phasing out the sales of most Chevrolets in Europe, as well as the cost of ending vehicle production in Australia.
He called 2014 a “transition year” that will put GM in a better position going forward.
“The execution of those restructuring activities in (International Operations) and Europe clearly impact earnings this year,” Ammann said. “But they will set us up for a much stronger result going into (20)15.”
Ammann also warned that it expects first-quarter earnings will be softer than usual before rising later in the year, mainly due to the timing of restructuring, and launch costs associated with updated heavy-duty pickups and new full-size SUVs, plus issues in South America.
Joseph Spak, an analyst with RBC Capital Markets, said GM’s guidance was disappointing, but agreed that the company’s future looks more promising.
“The guidance also gives the new management team a little more wiggle room to deal with in their first year,” he wrote in a note Wednesday. “Further, yesterday’s better-than-expected dividend announcement should add a little support.”
Investors seemed less than impressed with GM’s cautionary tone. Shares in the Detroit automaker closed down 1.6 percent at $39.38 after a day of heavy trading Wednesday.
Ford Motor Co. already had warned of more modest profits in 2014 and has had its share price slump as a result. Like GM, the Dearborn automaker also expects U.S. sales to be between 16 and 16.5 million vehicles this year.
While GM continues to struggle with its European operations, Ford of Europe CEO Stephen Odell says the industry as a whole appears to be emerging from its slump in the region.
Full-year industry data will be published by the European Automobile Manufacturers Association today. Odell told The News that he expects overall sales to total about 13.7 million for 2013. Prior to the recent recession, annual sales had reached more than 16 million in the region.
Ford expects industry sales in Europe to come in between 13.5 and 14.5 million in 2014.
“The first quarter this year will give us a good feel for the trajectory of recovery,” Odell said, adding that European sales of Ford vehicles to consumers rose 14 percent last year and commercial vehicle sales jumped 6 percent. However, sales to daily rental fleet fell substantially, and Ford’s overall sales in the region were down about 2.1 percent last year to 1.08 million.
One big area of concern for automakers is South America. The once-hot Brazilian market is losing steam. That is a particular problem for Chrysler Group LLC’s parent company, Fiat SpA, which remains heavily dependent on sales there.
Sergio Marchionne, CEO of Fiat and Chrysler, said the market there will be essentially the same this year as it was in 2013. Earlier this week, he also echoed Toyota’s view of the U.S. market.
“We’re seeing a maturation of the market in 2014, and we’re not going to see significantly different levels this year than we did in 2013,” Marchionne said. “But I don’t find that to be a concern.”
Yet, like Ford, Chrysler has warned that profits this year will be less robust. The company will release its fourth-quarter and full-year earnings for 2013 sometime after its board of directors meets on Jan. 29 to discuss the new structure of the company following its merger with Fiat SpA.
Ford is scheduled to release its numbers on Jan. 28. GM will follow on Feb. 6.