Daily Ticker

Auto Sales Back to Pre-Crisis Levels, Housing Recovery Helps

Daily Ticker

Detroit is back. Not the city. That’s still teetering on the brink of bankruptcy, but the automakers. They’re manufacturing more vehicles than they have in years and today’s auto sales reports for June are expected to show the strongest monthly sales since late 2007, a little more than a year before GM and Chrysler filed for bankruptcy protection under a government-orchestrated plan.

“We’re back to pre-crisis levels in the annual sales rate,” says Mike Santoli, senior columnist for Yahoo! Finance. “We ‘ve had tremendous pent-up demand for cars in this country… now we’re getting the payback for that.”

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The actual June sales numbers will trickle out throughout the day. Ford sales are leading, up 13%, followed by Chrysler, up 8.2%, and GM, up 6.5%. Sales of pickup trucks for all three were brisk . Sales of GM's Chevrolet Silverado rose 29%, while sales of Ford's F-Series pickups and Chrysler's Ram surged 24% each.

U.S. auto sales overall are expected to reach an annual rate of 15.7 million, up about 8% from a year ago and near the record 15.8 million in December 2007, before the big slump in sales.

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Not all of these vehicles are produced in Detroit, of course. Many automakers, especially foreign producers, have located their factories in non-union southern states such as Alabama, George, Mississippi and Tennessee.

Underlying the expected jump in June auto sales is a recovering economy, increasing consumer confidence, low interest rates and some hot new vehicles. “It’s really, really cheap to own or lease a car right now,” says Santoli, referring to the low interest rates. Those low rates not only increase affordability for consumers but benefit car companies as well, says Santoli, because they don’t have to give up as much on price when consumer financing is so cheap.

Increasing housing sales is another reason vehicles sales are rising, especially sales of pickups. “Pickup trucks are selling at three times the rate of passenger cars,” because of new housing construction, says Santoli.

Competitive labor costs are also contributing to the rise in U.S. auto sales. The average autoworker’s pay including benefits was $38 in 2011 compared to $60 in Germany and $37 in Japan, according to the Center for Automotive Research. That has encouraged foreign automakers to increase production in the U.S. largely for export.

”That old story you can’t make cars in America profitably anymore is no longer the story," says The Daily Ticker’s Aaron Task. “ Obviously that’s been a big boost to the economy, the auto industry and our exports.” U.S. auto exports, in fact, are three times higher now than they were in 2003, according to the U.S. International Trade Administration.

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