December 6, 2019

European Carmakers Split on How to Survive Slump

In the face of the slowest European car sales in two decades, competitors like Opel, Renault, Ford and Peugeot were introducing new models or at least flaunting design studies at the show. But Fiat had no big news. And that was by design, the company’s executives said.

“To launch a new model now, you lose a good opportunity, because when the market recovers, the model will be old,” Luca di Montezemolo, the chairman of the Ferrari unit of Fiat, said in an interview Tuesday.

Other carmakers are taking the opposite tack. “There is no other way to compete in a tight market except with new products,” said Karl-Thomas Neumann, president of General Motors Europe and chief executive of the company’s Opel unit.

The fates of companies and thousands of jobs will depend on which strategy turns out to be right. If the market has hit bottom and begins to grow again, as some in the industry predicted on Tuesday, Opel’s decision to offer a face-lift of its flagship Insignia, a sibling of the Buick Regal, will look smart. But if sales fail to improve, the Insignia and other new models may sell only at big discounts, adding further to the billions of euros in losses that Opel has accumulated in Europe. The same risk faces other carmakers that have suffered most since European sales began to plummet in 2008, including Ford, Renault and PSA Peugeot Citroën.

Because Fiat owns Chrysler, and its chief executive, Sergio Marchionne, is chief executive of both companies, the Italian carmaker’s fate has implications for its American sibling. Mr. Marchionne, normally a dominant presence at car shows because of his bluntness and sarcastic wit, raised eyebrows when he canceled a news conference planned for Tuesday. A spokesman for Fiat said that Mr. Marchionne was too busy and that his low profile did not signal “anything sinister.”

Because of the enormous complexity of designing and making a car, including marshaling a large supplier network, decisions on when to introduce and produce new cars are made at least two years in advance. Auto executives who are unveiling cars now — or, like Fiat executives, are not — are reckoning with decisions made long ago.

Still, in the here and now there is a strong correlation between how the auto companies are assessing the near-term market and the availability of new models. Mr. di Montezemolo of Ferrari voiced pessimism about the mass market. “Europe is still very difficult,” he said. “I don’t see any kind of recovery.”

Stephen Odell, chief executive of Ford of Europe, however, said on Tuesday that he expected the European market to grow 20 percent in the next five years. “There are plenty of indicators we are running around what looks like the bottom,” he said.

If so, Ford is ready to throw cars at the rebound. The company said Tuesday that it would introduce 25 new models by the end of 2017. That was a substantial increase from a year ago, when the company said it would introduce 15 new models through 2017. On Tuesday, the company unveiled a high-end version of its flagship Mondeo, called the Vignale, as well as a design study for a new version of its S-Max minivan.

Carlos Ghosn, chief executive of the Renault-Nissan Alliance, was also fairly optimistic. “I think we are about to see the end of the five-year decline,” he said at a news conference.

Mr. Ghosn noted that sales of used cars had improved, which he said was a sign that new-car sales would follow. “We have seen the volume of used cars go up and we’ve seen prices firm up,” Mr. Ghosn said. “We are pretty confident that the slope is ending.” But it is unlikely to be a strong recovery, he added.

Earlier this year, Renault introduced Captur, a compact sport utility vehicle. Small four-wheel-drive cars like the Opel Mokka are among the few bright spots in the European market. In Germany, such cars accounted for 16 percent of all new cars sold in the first seven months of this year, compared with 7 percent in 2009.

On Tuesday in Frankfurt, Renault unveiled the Initiale, a concept car that may be part of a drive by the French carmaker to recapture a share of the luxury market.

Peugeot, the European carmaker that may be suffering the most, showed a redesigned version of its 308 compact on Tuesday. It competes with the Volkswagen Golf in the segment of the European market that has the highest volume. It is a crucial car for Peugeot, but its debut now is a gamble. The smaller Peugeot 208, introduced last year, has not lived up to expectations, analysts said.

In 2008, when the European market began to sag, Fiat slowed its new model introductions. Its current lineup is built around variations of two basic models, the stylish 500 subcompact and the Panda, a compact wagon.

Richard Gadeselli, a Fiat spokesman, said that while Fiat did not introduce any new models in Frankfurt, it continued to invest in other brands that belonged to the company, like Maserati. Fiat is trying to convert Maserati from an expensive niche brand to one that competes more with the likes of BMW.

Fiat also plans to introduce an S.U.V. version of the 500 next year, while its Alfa-Romeo unit intends to re-enter the United States market next year, Mr. Gadeselli said. In Frankfurt, Alfa displayed its 4C sports car, which will be produced in limited numbers and used to re-establish the brand in the United States.

At the show, competitors said they found Fiat’s wait-and-see strategy hard to fathom.

“Our Italian competitor,” Jérôme Stoll, head of sales at Renault, said, shaking his head, “I don’t know who they are now.”

Article source: http://www.nytimes.com/2013/09/11/business/global/european-carmakers-split-on-how-to-survive-slump.html?partner=rss&emc=rss

Ramping Up U.S. Production, Ford Expands in Ohio

Ford, the nation’s second largest automaker after General Motors, said Thursday it would spend $200 million to renovate its Cleveland engine plant to produce small, turbocharged engines for use in its top-selling models.

The move is the latest by automakers to expand production in the United States, where sales have increased 14 percent so far this year compared with 2012.

Last month, G.M. announced plans to invest $600 million in its assembly plant near Kansas City, Kan., one of the company’s oldest factories. And Chrysler, the smallest of the Detroit car companies, is adding a third shift to its Jeep plant in Detroit.

The expansions are another tangible sign of the steady recovery in the American auto market, which fell to historic lows during the recession.

Both G.M. and Chrysler were forced to declare bankruptcy in 2009 in exchange for big government bailouts. While Ford survived the industry’s financial crisis without help, it still cut thousands of jobs and shuttered several factories to reduce costs and bring production more in line with shrinking sales.

But the tide has turned in car showrooms across the United States, prompting automakers to strategically increase output in their remaining plants.

In Ford’s case, the company added about 8,000 salaried and hourly jobs last year, and has said it plans to hire about 2,200 white-collar workers in 2013. Ford is also moving some vehicle production from Mexico to a Michigan plant, where it will add 1,200 jobs.

The investment in Cleveland is indicative of how Ford and other carmakers have trimmed labor costs in the United States and improved productivity since the recession.

Just a few years ago, the company was forced to consolidate two engine plants into one in northern Ohio and to close a major component operation.

“No question we have been through a lot in northern Ohio,” said Joe Hinrichs, the head of Ford’s Americas region, in an interview. “But now our North American business is very competitive with the best in the world.”

Ford plans to centralize production of its 2-liter, EcoBoost engine — used in popular models such as the Fusion sedan and Explorer S.U.V. — at the Cleveland facility by the end of next year. Currently, the company makes the engines at a plant in Spain and ships them to America.

While Ford is adding jobs and production domestically, it is racing to reduce costs in its troubled European division. Workers who previously built the small engines in Spain will be moved to a nearby assembly plant that is taking on work from a plant to be closed in Belgium.

Mr. Hinrichs said that a new agreement with the United Automobile Workers union local in Cleveland paved the way for the expansion there. The plant now employs about 1,300 workers.

“This is about servicing more demand in the U.S.,” Mr. Hinrichs said. “And with our competitive labor agreements, we can bring business to the U.S. from Spain and Mexico.”

Article source: http://www.nytimes.com/2013/02/22/business/ford-expanding-ohio-engine-plant.html?partner=rss&emc=rss

Bet on U.S. Pays Off for Germany’s Carmakers

German carmakers, at least, had a different vision of the future.

The recovery in the United States auto market, which produced big earnings growth at Chrysler and Ford in their fourth quarters, has also been a boon for Germany’s big three — Daimler, BMW and Volkswagen.

The double-digit increases in their American sales last year reflected an overall surge in demand by American buyers for European and, above all, German products. Well-designed vehicles and machinery, so coveted a Germany specialty that they can often fetch premium prices, were by far the biggest categories of European exports to the United States.

As a result, overall German exports to America rose 24 percent in October from a year earlier, outpacing the 18 percent growth for euro zone exports to the United States.

In many ways, the success of the German carmakers has let them invest to produce further success in the American market. The German companies are cashing in on years of commitment to the United States, which remained an important market for them even as the global auto industry trained its sights on China.

Volkswagen, for example, has invested $4 billion in the United States since 2008, building a factory in Chattanooga, Tenn., that began churning out Passat sedans in 2011.

“Five years ago, we reset the clock here in America,” Martin Winterkorn, the chief executive of Volkswagen, said in Detroit last month. “The Passat was made in America for America.”

BMW and Daimler’s Mercedes-Benz unit have been making sport-utility vehicles and other autos in America since the 1990s: BMW in Spartanburg, S.C., and Mercedes in Tuscaloosa, Ala.

That presence put them in position to take advantage of the revival of the American market.

Nearly a third of the vehicles that BMW sells in America are built in that country, according to LMC Automotive, a research firm in Troy, Mich. Mercedes and VW both produce about a quarter of what they sell in the United States in local factories.

BMW and Mercedes have also expanded their appeal in the United States by moving carefully into more affordable parts of the market. Mercedes, for example, sells an entry-level Mercedes sedan for less than $30,000.

All of that has contributed to a sales surge. BMW vehicle sales in the United States rose 14 percent last year, including the Mini brand; sales of Daimler’s Mercedes and Smart brands increased more than 15 percent; and Volkswagen’s sales soared 34 percent, including Audi brand cars.

For Mercedes and VW, those were better growth rates than in China, and they helped to offset slower sales there.

The German automakers’ strong financial results contrast with those of European rivals like Renault and PSA Peugeot Citroën, which abandoned the United States market decades ago. Now the French carmakers are short of ways to counterbalance the stricken European market. It is probably too late for them to re-enter the United States, even if they could afford the cost of re-establishing a dealership network.

Mercedes and VW are so well placed in the United States that they even did a little strutting during the televised Super Bowl football championship on Sunday, showing splashy commercials.

In the Mercedes spot, the actor Willem Dafoe, playing the devil, offers a young man a new CLA sedan in exchange for his soul. After a fantasy sequence in which the young man cuddles with the model Kate Upton, dances alongside Usher and overtakes Formula One cars on a racetrack, he sees a billboard advertising the CLA for $29,900. He realizes he can afford one without the devil’s help.

The euro zone recession would clearly be much worse than it is without the income that European companies are bringing in from the United States. While Germany has been the main beneficiary, accounting for 40 percent of euro zone exports to the United States, countries including France, Italy and Spain also recorded big gains in sales in America of products that span categories from chemicals to wine.

Bill Vlasic contributed reporting from Detroit.

Article source: http://www.nytimes.com/2013/02/05/business/global/german-automakers-bet-on-us-market-and-win.html?partner=rss&emc=rss

Hyundai and Kia Acknowledge Overstating the Gas Mileage of Vehicles

DETROIT — The South Korean carmakers Hyundai and Kia built their brands around the idea that their cars got better gas mileage than competitors, promoting that fact in ads that often took swipes at less efficient rivals.

But on Friday, the companies admitted that they had overstated the fuel economy of 900,000 vehicles sold in the United States over the last two years — about one-third of the vehicles they sold during that period.

Hyundai and Kia, which are both owned by the Hyundai Motor Group, said they would begin a broad effort to reimburse consumers and restate mileage estimates for the affected models.

The admission followed an investigation by the Environmental Protection Agency into consumer complaints that their cars were underperforming the official mileage estimates on the window stickers of new Hyundai and Kia vehicles. While few drivers achieve the stickered mileage levels under real-world conditions, the government requires automakers to conduct standardized tests to calculate the figures so that buyers can more easily compare the fuel efficiency of various models.

Hyundai and Kia apologized to customers for what they called “procedural errors” in testing that resulted in incorrect mileage stickers on some of their most popular models, like the Hyundai Elantra and Kia Rio.

It is a costly setback for the companies, which are among the fastest-growing carmakers in the United States and self-proclaimed leaders in the highly competitive area of fuel economy.

“Given the importance of fuel efficiency to all of us, we’re extremely sorry about these errors,” said John Krafcik, the chief executive of Hyundai’s American operations.

The E.P.A. did not announce any sanctions or fines against either carmaker, and said both companies agreed to voluntarily lower fuel estimates on a majority of their new cars and S.U.V.’s.

“Consumers rely on the window sticker to help make informed choices about the cars they buy,” said Gina McCarthy, an agency official. “E.P.A.’s investigation will help protect consumers and ensure a level playing field among automakers.”

Hyundai and Kia now face a protracted struggle to restore their reputations.

“In an industry where reputation is so important, this will undoubtedly give both carmakers ugly black eyes,” said John O’Dell, an analyst at the auto research firm Edmunds.com.

To compensate customers who bought cars with the inaccurate stickers, the companies will offer debit cards to reimburse them for the difference between the stated gas mileage and the actual amount of gas used in their vehicles.

The companies said their dealers would check vehicle odometers to see how much more customers spent on gas than they would have if the window stickers had been accurate. That amount, in addition to a 15 percent “inconvenience” bonus, will then be refunded.

The company estimated that the average debit card will be for about $88, based on a typical car driven 15,000 miles this year that had an overstated fuel economy of 1 mile per gallon. Current owners will be able to refresh the card as long as they own the vehicle.

Mr. Krafcik declined to estimate the total cost of the program, which could run into the tens of millions of dollars. “We’re going to spend what it takes to make it right,” he said.

The companies will also replace mileage stickers on large numbers of unsold cars, and run newspaper ads explaining the mistakes and reaffirming their commitment to delivering good fuel economy.

The E.P.A. said it discovered the mileage discrepancies during a continuing fuel-economy audit program that covers vehicles made by various manufacturers.

The agency said it was aware of consumer complaints about Hyundai mileage estimates when its audit found a difference in the stated and actual fuel economy mileage of an Elantra sedan. The E.P.A. then expanded its testing to other Kia and Hyundai models.

The agency said its investigation was continuing.

“Although it took more than a year, the E.P.A. did catch the discrepancies,” Mr. O’Dell said.

The companies said the misstated mileage figures were a result of internal errors in testing the vehicles for E.P.A. certification.

The government has standard testing procedures it requires all automakers to use to produce mileage estimates, which can then be displayed on cars for sale in dealer showrooms.

The tests measure aerodynamic drag on vehicles, how much energy is used to overcome road resistance and the amount of fuel used to drive the engine and wheels.

In the case of Hyundai and Kia, errors in testing caused inaccurate mileage estimates that were one to six miles per gallon higher than the vehicles were capable of. The companies gave no explanation for the wide band of errors.

The corrective actions agreed to by the carmakers will have an immediate effect on their marketing efforts.

The fleet average of all Hyundai and Kia models combined will be reduced by 3 percent, to 26 miles per gallon from 27. Also, Hyundai will retract widely publicized claims that four of its models get 40 miles per gallon on the highway.

Mr. O’Dell of Edmunds said that falling out of the 40 m.p.g. category could hurt sales, particularly when competitors are also advertising that figure as a new benchmark for fuel economy.

The E.P.A. said that it had twice before required manufacturers to relabel a vehicle’s fuel economy since 2000, but that this was the first instance where multiple models from the same carmaker had overstated mileage estimates.

Article source: http://www.nytimes.com/2012/11/03/business/hyundai-and-kia-acknowledge-overstating-the-gas-mileage-of-vehicles.html?partner=rss&emc=rss

Car Buyers Unfazed by Storms, Financial and Tropical, in August

General Motors, the Ford Motor Company and Chrysler all posted impressive gains from a year earlier in their August data released on Thursday. Industrywide, sales rose 7.5 percent from a year ago and 1.2 percent from July, according to the Autodata Corporation, which tracks auto sales.

“Consumers are getting used to making these big-ticket item purchase decisions in an everlasting, chaotic, uncertain economic environment,” said Jesse Toprak, vice president for industry trends and insight at TrueCar.com, an automotive research firm. “We’re seeing more and more consumers becoming relatively comfortable in pulling the trigger when they don’t have all the answers.”

Almost all of the 20 largest automakers have sales gains for the year to date. The only exceptions are Honda and Toyota, whose dealers have struggled to keep their lots stocked sufficiently since the earthquake and tsunami struck Japan early this year. Honda’s sales in the United States fell 24.3 percent last month from August 2010, and Toyota’s sales declined 12.7 percent.

Shortages of some small, fuel-efficient cars hindered other carmakers as well.

G.M. sales rose 18 percent, and Ford reported an 11.1 percent increase. But both companies are having trouble keeping up with demand for their respective compact cars, the Chevrolet Cruze and Ford Focus, among other models.

G.M. is adding overtime shifts to the Ohio plant that builds the Cruze, and Ford said it is stepping up overall production by 9 percent in the fourth quarter from what it was at the end of 2010. Sales of the Focus, which was redesigned for the 2012 model year, declined 8.9 percent in August despite increased demand for vehicles of its size.

The auto industry continues to make big strides in recovery from the depths of the financial crisis. Sales of autos are on track to be well ahead of last year, when 11.6 million vehicles were sold in the United States. G.M. said it remains confident that industry sales will top 13 million vehicles this year, even though several analysts have recently chopped their projections. At G.M.’s projected rate, sales would be roughly back to their 2008 level, when 13.2 million were sold in the United States.

“Consumers are being cautious, and appropriately so, but they are not retrenching,” said Don Johnson, G.M.’s vice president for United States sales operations, on a conference call. “All indications to us are that the industry is going to slowly grow for the rest of this year.”

But Adam Jonas, an analyst with Morgan Stanley, questioned whether G.M. is “playing chicken” with the economy by maintaining or increasing production even as consumer confidence levels slide. G.M. “could get caught out with large production cuts and/or price discounting should the underlying market not recover as G.M. appears to have anticipated,” Mr. Jonas wrote in a report Thursday afternoon.

Ford officials said the company is not stockpiling extra inventory in preparation for a possible strike by the United Automobile Workers union, a typical practice for the Detroit carmakers during past negotiations. U.A.W. members have been overwhelmingly voting this week in favor of authorizing a strike against Ford if contract talks break down.

Labor experts say a strike against Ford is unlikely, but union leaders have been urging workers to approve an authorization as a bargaining tool. At least 98 percent of workers have voted in favor of authorizing a strike at large U.A.W. locals in Chicago, Cleveland, Louisville and Kansas City, Mo. Voting is scheduled to finish Friday. Ford is the only Detroit carmaker whose workers can strike over wages and benefits. G.M. and Chrysler employees agreed to no-strike clauses as part of concessionary deals they approved before those companies’ bankruptcies in 2009.

Chrysler said its August sales rose 30.6 percent, including a 58 percent increase for its Jeep brand of sport utility vehicles. It was the 17th consecutive month of year-over-year increases for Chrysler, which is gathering momentum after being written off by many critics. The company outsold Toyota by 636 vehicles, the third time this year that Chrysler has topped its larger, but injured, Japanese rival.

Nissan, which was able to return to normal production levels much faster that Honda and Toyota, reported a 19.2 percent gain. Nissan ran ads last month juxtaposing the abundance of inventory at its dealerships with bare Honda showrooms.

Sales rose 9.1 percent at Hyundai and 26.9 percent at Kia.

Consumer confidence has slipped recently, and economic growth has been crimped by the persistent European debt crisis and the debate in Washington over how to cut spending by the federal government.

As August began, markets swooned with uncertainty over whether Congress would lift the debt ceiling and with the subsequent cut in the nation’s credit rating. The month ended with much of the East Coast focused more on Hurricane Irene than on buying a new car. In addition, some shoppers probably stayed on the sidelines in the hopes of getting a good deal during the coming holiday weekend, said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates.

“We did see things get a little bit weaker as we got into the second half of the month,” Mr. Schuster said. “Many buyers are still conditioned to the strong Labor Day sales, so we could have seen some buyers pull back their purchase decisions waiting for some deals.”

From January through July, industry sales rose 10.9 percent. Excluding the 7.1 percent decline at Toyota and 2.6 percent decline at Honda, the industry gain was 16.6 percent in the period.

Nissan pulled further ahead of G.M. last month in the battle between the Leaf electric car and the Chevrolet Volt plug-in hybrid. Leaf sales for the month were 1,362, more than quadruple the Volt’s 302. Since they were introduced late last year, the Leaf has outsold the Volt by two to one.

G.M. halted production of the Volt this summer to retool in preparation for an large increase in production and said it is still working to build enough inventory to meet demand. It has promised significantly higher Volt sales in the months ahead.

“Every unit that we ship right now is presold,” said Alan Batey, the head of Chevrolet sales in the United States. “It’s essentially a magnet for us. It’s doing a wonderful job for the brand.”

Article source: http://feeds.nytimes.com/click.phdo?i=0edd36412c3b69ffc27986788a23a7f6

New Breed of Leaders Helped Guide Fuel Standards, Chrysler Says

In past battles over gas-mileage requirements, the Detroit car companies argued that big increases in fuel-efficiency would be too expensive and cost jobs.

But last week’s accord between the Obama administration and carmakers to reach an average of 54.5 miles per gallon by 2025 showed how times, and senior executives, have changed in Detroit.

“These are business people who did not grow up and become conditioned to doing business in Detroit,” Sergio Marchionne, the head of Chrysler and its parent company, the Italian automaker Fiat, said at an industry conference here. “They accept the challenge of the new without being afraid.”

Mr. Marchionne, who has dual Italian and Canadian citizenship, took over the top spot at Chrysler when it emerged from its government-sponsored bankruptcy two years ago.

Similarly, the chief executive of General Motors, Daniel F. Akerson, joined the company from the Carlyle Group private equity firm after G.M. came out of Chapter 11. And at Ford, Alan R. Mulally was recruited from the aircraft manufacturer Boeing in 2006 to bring a fresh perspective to the automaker’s top ranks.

The three executives, Mr. Marchionne said, were not hamstrung by the litany of past protests by Detroit against tougher fuel rules mandated by Washington.

“This industry had a very bad habit of crying wolf,” he said. “Sooner or later, somebody is going to call your bluff.”

Mr. Marchionne’s observations were echoed by other attendees at the conference sponsored by the Center for Automotive Research, an industry research group, including environmentalists who locked horns with Detroit over fuel-economy in the past.

“It’s become really hard for the companies to say they can’t achieve these higher standards,” said Dan Becker, director of the Safe Climate Campaign, a group working to mitigate global warming. “I endorse Marchionne’s truth-telling. These new guys get it.”

Even the United Auto Workers union has shifted course and backed the new fuel rules, rather than bemoaning the potential job losses resulting from government mandates.

Bob King, who was elected the union’s president last year, said the U.A.W. was an “ally with environmentalists” and that he expected higher mileage rules to create new jobs in Detroit’s factories.

“They recognize that if you are adding technology to these vehicles, it should be their members who are doing it,” said Mr. Becker.

Still, not everyone in Detroit is as embracing of the new fuel rules, which require automakers to improve the efficiency of their cars by 5 percent annually from 2017 to 2025, and trucks by 3.5 percent each year for the first four years of the cycle, then 5 percent annually for the remainder.

“I personally saw it as political engineering,” said Sean McAlinden, the Center for Automotive Research’s chief economist. He said that government agencies were setting fuel targets based on a “mass of extrapolated exaggerations” about the gains that new technology could achieve.

But Mr. Marchionne was more in step with the overall sentiment that car companies need to embrace the new standards instead of criticize them.

“Anybody who surrenders 14 years before the date ought not to be in business,” he said, referring to the 2025 deadline for the new standards.

He said the government regulations could work if they were “technology neutral” and not weighted toward developing electric cars or vehicles powered by hydrogen fuel-cells. The new regulations are expected to offer credits for low-emission technologies, but the precise regulations are still being drafted by the government.

Instead, Mr. Marchionne advocated continued, incremental improvements in the internal combustion engine, including the size of engines and improving transmissions.

He cited the mileage improvements made on Chrysler’s new 300 full-size sedan. That sedan has a smaller V-6 engine than earlier models and a new eight-speed transmission, and its mileage has improved from 27 miles a gallon to 31 miles a gallon in the 2012 model, he said.

“The power-train guys are an incredible pool of talent,” he said. “Let them do their jobs.”

That view was shared by G.M. executive Charlie Klein, who leads a team of engineers responsible for meeting the new fuel-efficiency rules.

Mr. Klein said in a presentation that G.M. was stepping up work on existing technologies, including direct-injection engines, improved aerodynamic designs, and fuel management systems like engines that shut down when stopped and reactivate when the driver presses the accelerator.

Improving fuel economy is, he said, an open-ended quest that was hardly worth fighting over anymore. “It’s here to stay,” he said. “We might as well get used to it.”

Article source: http://feeds.nytimes.com/click.phdo?i=6f2a42f9b7a5cb386d7084572740f4ca

Detroit Auto Makers Topped Importers in Sales in May

Toyota’s 33 percent decline allowed Chrysler, whose sales rose 10 percent, to climb into third place last month. For the first time ever, Hyundai Kia Automotive Group, the South Korean parent of the Hyundai and Kia brands, outsold Honda, whose sales were down 23 percent.

Inventory constraints and higher prices combined to drag the industry’s annualized selling rate to its lowest level of the year as some shoppers decided to hold off in the hopes of finding a better deal or wider selection later.

“Some buyers looked at the reports or maybe heard something about it and decided to wait instead of going down to the showroom and look,” Jeff Schuster, executive director for global forecasting at the research firm J.D. Power Associates, said.

The Ford Motor Company and General Motors reported small declines in their sales but pointed to positive signs in purchases of smaller vehicles as fuel economy became a stronger selling point.

G.M. said its sales decreased 1.2 percent over all but increased 13 percent for its passenger cars.

Ford reported a 2.3 percent decline, counting year-ago sales of the Volvo brand, which it no longer owns; sales by its Ford and Lincoln brands were up almost 5 percent. Small cars and crossovers accounted for 27 percent of Ford’s sales, up from 19 percent a year ago.

“The market took a little bit of a breather,” Robert S. Carter, a Toyota group vice president, said on a conference call. Mr. Carter said Toyota is “well ahead of our recovery plans” in Japan and is adding more discounts in June to draw in shoppers.

“We remain very bullish on the direction of the industry,” Mr. Carter said.

Meanwhile, some carmakers reported large gains. Kia’s sales rose 53 percent to an all-time monthly record of 48,212, and Hyundai’s were up 21 percent. Volkswagen said sales rose 28 percent and that May was the company’s best month in nearly eight years.

Across the industry, sales were down slightly from a year ago, after increasing about 20 percent on a year-over-year basis from January through April. Toyota and Honda were affected the most by the earthquake and tsunami that struck Japan in March.

Don Johnson, G.M.’s vice president for United States sales operations, said “consumers sat on their hands” for much of May, but he was confident the industry’s sales pace would rebound later this summer.

“We continue to believe that the recovery remains on track,” Mr. Johnson said on a conference call.

Toyota and Honda said their plants were building more vehicles, but it would take time for inventory at their dealerships to approach more normal levels. Many of the most popular — and most fuel-efficient — Japanese models have become somewhat scarce on dealer lots, causing some consumers to either look at other brands or put off shopping until inventories can be restocked.

“Toyota and Honda lost significant market share in May after cutting their incentives drastically to preserve inventories,” Brian A. Johnson, an analyst with Barclays Capital, wrote in a report to clients. “This strategy appears to have somewhat backfired on them, and Toyota had to raise incentives back midmonth in order to limit the damage.”

TrueCar.com, a Web site that tracks vehicle sales and pricing, said incentive spending by automakers, which included cash-back rebates, subsidized financing rates and other deals, fell in May to the lowest level in nearly nine years.

At the same time, automakers have been raising prices to compensate for higher raw material costs; Ford this week announced the third price increase for its lineup this year. In addition, dealers have been able to charge more for many models that are highly fuel-efficient or for which demand is much greater than the available supply.

Mr. Johnson estimated that May’s annualized selling rate would come in at 12.1 million, down from 13.2 million in April. Most analysts and automakers expect sales for all of 2011 to top 13 million and are sticking with those projections despite the slowdown in demand.

Unlike in 2008, when surging gas prices cut deeply into auto sales, fuel costs are not expected to scare shoppers away from dealerships.

“Customers increasingly are demanding new products that deliver compelling fuel economy,” Ken Czubay, Ford’s vice president for United States marketing, sales and service, said in a statement. “Ford’s new fuel-efficient products and powertrains arrived at the right time.”

Article source: http://feeds.nytimes.com/click.phdo?i=6b6babb2e8d9e6a1fc030a9dcf0b2b1e