Surprise: Cos. don't overshoot analysts

Forecasts add a dab of caution

Surprise: Cos. don't overshoot analysts

Fay: Hoping for 16 million sales
Getting real
In 2012 and 2013, the sum of carmakers' sales forecasts far surpassed analysts' predictions about the size of the market. Not so in 2014.
Carmakers: 16.37 million*
Analysts: 16.2 to 16.5 million
2013 sales: 15.58 million
*Sum of companies' individual forecasts for 2014
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Here's a sure sign that executives feel a lot less giddy about prospects for new-vehicle sales than they did a year ago.

Add up the internal forecasts of automakers for 2014 and, theoretically, you get a total that roughly equals what analysts expect the overall market to be. And that almost never happens.

Usually carmakers expect their own brands to outperform everyone else's, especially in a rising market. So the sum of the companies' expectations far exceeds predictions about the size of the total market. It's the old story: Combined market share forecasts come to 120 or 130 percent of the market.

Well, not so this year. The brand-by-brand forecasts, when added up, total less than 16.4 million units. That's about the same as the consensus industrywide forecast -- a sign of scaled-back expectations and a growing fear of bloated inventories.

After a bullish 2013 projection -- which it exceeded -- Toyota Motor is dialing back to a modest 3 percent growth plan.

"Our plan right now [is to outperform], but we will reassess at a couple key points," Toyota Division General Manager Bill Fay said last week. "It's been a little bit of a slow start to the year, but we're very optimistic it will be a 16 million year."

Analysts' forecasts range as high as 16.5 million, up from 15.6 million sales in 2013. LMC Automotive projects 16.2 million; Kelley Blue Book, 16.3 million; Edmunds, 16.4 million and Cars.com analyst Jesse Toprak, 16.5 million.

All analysts said last week they are sticking to their 2014 forecasts. Toprak said "consumers who delayed purchases due to severe weather will start coming back to the dealerships in strong numbers beginning this month."

And he added that inventory buildup "will cause sizable increases in incentive spending especially in the large truck segment."

But the exuberant forecasts carmakers made in the past two years have largely disappeared. A year ago, the sum of automakers' forecasts for 2013 was 15.8 million, compared with the consensus forecast of 15.1 million to 15.4 million units. Sales came in over the most optimistic projection but still fell short of the sum total of individual brand projections by 207,000 units. That overcapacity showed up in increased incentive spending in the fourth quarter as inventories rose dramatically.

For 2012, the consensus forecast was 13.6 million to 13.8 million, but the combined internal targets of 15 automakers came to 14.4 million.

More modest expectations
 2014 projected*2013 final% change
General Motors2,952,0002,786,0786
Ford Motor2,544,0002,485,2362
Toyota Motor2,300,0002,236,0423
Chrysler Group1,960,0001,800,3689
American Honda1,600,0001,525,3125
Nissan/Infiniti1,310,0001,248,4205
Hyundai745,000720,7833
Kia585,000535,1799
VW407,000407,7040
Subaru460,000424,6838
Mercedes-Benz345,000334,3443
BMW/Mini390,000376,7904
Mazda315,000283,94711
Audi190,000158,06120
Volvo65,00061,2336
Jaguar/Land Rover70,00066,9625
Other132,000130,9941
TOTAL16,370,00015,582,1365
*Projections are based on statements by executives or dealers

Hard targets


Those brand forecasts are not wishful thinking; they are hard targets set by automakers, and they dictate production and inventory planning. But some executives have had their fingers burned and their 2014 projections are more conservative.

Some car executives say that after the particularly slow January and February -- in fact, a slow past half-year -- even hitting 16 million sales in 2014 may be difficult. That may mean some paring back of corporate forecasts that were made late last year.

Mike Jackson, CEO of AutoNation, says that if the market does not pick up steam quickly it will be very hard to reach the 16 million mark.

"We now have six [consecutive] months of very tepid industry sales increase of only 2 percent," Jackson said in an interview on CNBC. "We're either about to have several very big breakout months or the industry is not on track for 16 million units this year."

U.S. auto sales were flat in February, although rising showroom traffic in recent weeks has fueled hope that the industry will finally break out of its three-month, weather-crimped slump in March.

Total sales fell by just 357 units in February, or 0.03, percent. Five of the seven biggest automakers posted declines while Chrysler Group and Nissan Motor Corp. bucked the trend with double-digit increases.

Danger signal


The full-year sales projections of individual brands came from interviews with executives and dealers. For automakers that did not give a precise number, estimates are based on executives' projections of percentage increases or statements about whether a brand would outperform or match the industry sales rate or its previous market share.

Analysts watch the combined forecasts of carmakers closely. It is a possible danger signal. As noted, a year ago, after a 2012 finish of 14.5 million units, the total of automakers' forecasts for 2013 was 15.8 million -- much higher than the industry consensus forecast of 15.1 million to 15.4 million.

Still, some automakers are more buoyant than ever this year.

"I sell as many as I can," said Reid Bigland, Chrysler's head of U.S. and Canadian sales.

Chrysler's sales goals for 2014 have the automaker selling just shy of 2 million vehicles in the United States this year, up from 1.8 million in 2013. That would nearly double the industry's projected 5 percent growth rate in a 16.4 million year.

General Motors has quietly told dealers to expect 6 percent growth when all its brands are combined. That's double the industry's growth if it hits 16 million units.

Audi, Kia and Mazda are all targeting sales that outpace the industry because of higher inventories of limited products, the introduction of new high-volume vehicles, or simply a demand for higher sales from global headquarters. Plus, even a relatively small volume increase will appear as a dramatic percentage increase.

Mike Accavitti, American Honda's senior vice president of automobile operations, worries that irrational exuberance will trigger a return to bad habits.

"I don't know any executive want-ing to get into an incentive war on purpose," he said. "There needs to be a mind-set shift in the industry, where companies are ready and willing to take production down, rather than jam production and incentivize. I hope we would all operate in a more rational manner, but you never know what's going to happen."

But even Honda might find that enlightened path tricky to navigate. Two weeks ago it opened an assembly plant in Celaya, Mexico, to produce 200,000 additional subcompact hatchbacks and crossovers.

Ryan Beene, Nick Bunkley, Lindsay Chappell, Mike Colias, Diana T. Kurylko, Gabe Nelson, Larry P. Vellequette and Bradford Wernle contributed to this report.

You can reach Mark Rechtin at mrechtin@crain.com. -- Follow Mark on Twitter


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