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Mixed sales results, but automaker stocks rise on need for cars in Houston

DETROIT — The Big Three Detroit automakers on Friday reported better-than-expected August sales and issued optimistic outlooks for demand as residents of the Houston area replace flood-damaged cars and trucks after Hurricane Harvey, sending their stocks higher. General Motors, Ford and Fiat Chrysler posted mixed August U.S. sales, with GM up 7.5 percent and Ford and Fiat Chrysler down. Japanese automaker Toyota improved sales by nearly 7 percent, while Honda fell 2.4 percent. Still, analysts focused on the potential for Detroit automakers to cut inventories and stabilize used vehicle prices as residents of Houston, the fourth largest city in the United States, are forced to replace tens of thousands, perhaps hundreds of thousands, of vehicles after the devastation from Hurricane Harvey. Mark LaNeve, Ford's U.S. sales chief, told analysts on Friday that following Hurricane Katrina in 2005 "we saw a very dramatic snapback" in demand. That said, Ford sales fell 2.1 percent in August. It sold 209,897 vehicles in the United States, compared with 214,482 a year earlier. Sales were down 1.9 percent in the Ford division and off 5.8 percent at Lincoln. Demand was down for cars, crossovers and SUVs. It was not clear how many vehicles in the Houston area will be scrapped, LaNeve said, saying he had seen estimates ranging from 200,000 to 400,000 to 1 million. Ford's Houston dealers may have lost fewer than 5,000 vehicles in inventory, he said. Ford is the No. 1 automaker in the Houston market, with 18 percent share, according to IHS Markit. The company plans to ship used vehicles to Houston dealers and has "every indication we would have to add some production" of new vehicles to meet demand, LaNeve said. Investor concerns about inventories of unsold vehicles and falling used car prices have weighed on Detroit automakers' shares most of this year. Now, automakers can anticipate a jolt of demand from a big market that is a stronghold for Detroit brand trucks and SUVs. "It's got to be a positive for the industry," LaNeve said. Investors appeared to agree. GM shares rose as much as 3.3 percent to their highest since early March. Ford increased 2.8 percent at $11.34, and Fiat Chrysler's U.S.-traded shares were up 5.2 percent $15.91, hitting their highest in more than five years. GM reported a 7.5 percent increase in U.S. auto sales in August, helped by robust sales of crossovers across its four brands.

VW to relax ambitious US sales targets?

The Volkswagen brand sold 407,704 cars last year, a 6.95-percent decline compared to 2012, and it's down a further 8.36 percent through the end of April 2014 compared to this time last year. In order to to put the sales football between its Strategy 2018 goal posts, the brand would need to add 100,000 more sales every year to achieve the lofty 800,000-unit target. Coming to grips with how unreasonable that is, VW US CEO Michael Horn has said, "For now, we have to have realistic targets."
The reasons for the brand's slow-down are imprecise, but lots of folks are throwing lots of reasons around. Last November, VW Group Chairman Ferdinand Piech told Bloomberg, "We understand Europe, we understand China and we understand Brazil, [but] we only understand the US to a certain degree so far." Analysts say the brand hasn't had midsize and compact SUV offerings, especially an overdue retail version of the CrossBlue, and the ones it does have are priced too high for their segments. It "didn't introduce enough new engines, or alternative technologies or model variants" for the Passat and Jetta. It devoted so many resources to China that the US market suffered. It was being outspent two-to-one on advertising by competitors. Its J.D. Power dependability ratings aren't high enough to overcome its past. It "has never really taken the US customer seriously." And so on.
There's still no official admission of defeat concerning the target, but reading between the lines there are some VW execs that appear to accept it won't happen short of some deus ex machina. Still,

VW sales increase 0.6% in September despite diesel scandal

Volkswagen was spared in the month of September from posting a sales disaster, but in reality, the impending doom and gloom is likely just postponed until October. According to VW, it delivered 26,141 vehicles to its dealerships last month, which represents a 0.6-percent gain over the same period a year ago. While up, that meager increase represents the smallest uptick of all major brands in the United States, which is currently in the middle of the best vehicular sales year in the last decade. Audi, the German automaker's mainstream luxury unit, saw a bigger gain at 16.2 percent with 17,340 total units sold, thanks in large part to the popularity of its crossover models. These numbers can't totally be taken at face value, however. In 2014, Labor Day weekend was counted as part of August's sales figures; in 2015, that traditional car-buying holiday fell early in September and is therefore partly responsible for the huge increases from all brands doing business in the United States. Remember, the diesel emissions scandal didn't hit the news until September 18, which means VW was free to sell its 2.0-liter TDI engine for the majority of the month. In other words, October is going to be the real indicator of sales reckoning as it will be the first full month that the brand can't sell its popular diesel models and the first since its emissions scandal broke. Still, TDI sales were down last month. VW reports a total of 3,060 sales of vehicles equipped with TDI engines, which represents 11.7 percent of total volume. That's nearly cut in half from the TDI's year-to-date volume percentage of 20.4 percent. "We would like to thank dealers and customers for the support of the Volkswagen brand," said Mark McNabb, chief operating officer for Volkswagen of America in a statement. "Volkswagen will continue to work diligently to regain trust and confidence in our brand." It's not yet clear exactly when VW will issue a fix to make its 2.0-liter TDI engine emissions legal, or when the EPA will recertify those models for sale. Once those two things happen, dealers will again be free to sell vehicles equipped with the powertrain, but even then it remains to be seen how consumers react when the sales ban is lifted. Scroll down below for all the sales data from Volkswagen in September.