Auto industry comes down off seven-year run

Mike Manley, president and CEO of Jeep, introduces the 2019 Jeep Wrangler during the Los Angeles Auto Show, Wednesday, Nov. 29, 2017.

ASSOCIATED PRESS

After an extraordinary seven-year run up that sent U.S. auto sales surging to record levels, the industry took a small step backward last year, signaling that the market for new cars and trucks has peaked.

But that’s not to say the auto industry — one of the most critical parts of the region’s economy — is anywhere near a trouble spot.

Mike Manley, president and CEO of Jeep, introduces the 2019 Jeep Wrangler during the Los Angeles Auto Show, Wednesday, Nov. 29, 2017.

Even with volumes slipping 5 percent in December, automakers sold 17.23 million new cars, trucks and sport utility vehicles last year. Though that’s down about 2 percent from the all-time high of 17.55 million in 2016, it’s still the industry’s fourth highest year on record and the third straight year of sales topping 17 million units.

“Any time the market passes 17 million units it’s a good year for the auto industry, though the real story in 2017 was the near wholesale death of the car,” said Karl Brauer, executive editor of Autotrader and Kelley Blue Book. “The good news is truck and SUVs sales pretty much counterbalanced the drop in cars, and those models are almost always more profitable for automakers.”

That’s certainly true for Fiat Chrysler Automobiles, which counts the Toledo-built Jeep Wrangler as one of its most profitable models.

FCA said Wrangler sales plunged 13 percent in December. However, much of that decline is likely due to prospective buyers waiting on the brand new Wrangler model, which was unveiled at the end of November and is beginning to arrive in dealerships now.

A company spokesman said the plant began shipping the new Wranglers last week. At least one has been delivered in Toledo; Yark Automotive Group Vice President Doug Kearns said a crystal granite Wrangler Sahara arrived on Wednesday.

Full year sales of the current Wrangler slipped 1 percent in 2017 to 190,522.

Overall, Fiat Chrysler sales slipped 11 percent in December, a decline that was significantly steeper than most of its peers. However, the company said part of that decline was because of its strategy to pare back sales to rental fleets. The company said retail sales were down 3 percent in December.

For the year, Fiat Chrysler said sales were down 8 percent.

General Motors said its December sales slipped 3 percent, while Toyota reported an 8 percent decline in December. Ford reported a 1 percent increase in December.

For the year, GM, Ford, and Toyota were each down 1 percent. 

Though analysts expect U.S. auto sales to decline again this year, demand for trucks and sport utility vehicles remains strong. That should help keep profits up, even as automakers sell fewer units.

“Unit volume no longer is the only metric to say how profitability is going. These manufacturers are figuring out how to operate at a high profit margin with a smaller volume level,” said Chris Hopson, an analyst with IHS Markit. “Those signs are certainly pointing the the right direction for them moving into ‘18.”

That’s good news for the greater Toledo region, where the auto industry supports thousands of jobs.

Fiat Chrysler, which has plants in Toledo, Perrysburg Township, and Dundee, Mich., has nearly 6,400 employees in the area. General Motors has more than 2,900 employees between its facilities in Defiance and Toledo, while Ford has 1,270 workers in Lima and another 3,500 at its Flat Rock Assembly Plant about 40 miles north of Toledo.

Experts also say there are a number of reasons for optimism about 2018. Consumer confidence is hovering near a 17-year high, unemployment is low, credit is still affordable, and buyers aren’t shy about plunking down big money.

Kelley Blue Book said the average transaction price for new vehicles in December reached a record $36,113.

Mr. Kearns, of Yark, said the automotive group had its second best year ever in 2017 and that the local economic indicators seem primed for a solid 2018.

“I think everybody’s really optimistic about what ‘18 brings and I think it’s going to be a good year.”

Contact Tyrel Linkhorn at tlinkhorn@theblade.com, 419-724-6134, or on Twitter @TyrelLinkhorn.