Don’t Buy Carmakers’ Bad-Weather Excuses

(Originally published here.)

Many of the biggest carmakers had a miserable time last month. Ford Motor Co. sold 7 percentfewer vehicles than in January 2013, while General Motors Co.’s sales fell 12 percent. Foreign brands did little better, with Toyota Motor Corp. reporting a 7.2 percent drop and Honda Motor Co. recording a 2.1 percentdecline. Executives and some analysts have blamed the weather. That may sound reasonable — who goes car shopping during a snowstorm or in sub-Arctic temperatures? But don’t fall for it. First, it wasn’t actually that cold. Second, some other carmakers sold more last month than a year earlier.

Yes, there were lots of cold days in certain parts of the country, particularly the upper Midwest. But average temperatures during January weren’t that different from their historical averages. That’s true even for cities such as New York and Boston, which got hit by cold and snow. For context, the Institute of Supply Management reported a disappointing drop in manufacturing activity in January. Michael Feroli, the chief U.S. economist at JPMorgan Chase & Co., concluded that “essentially none” of the decline could be attributed to the weather.

Here’s an even bigger problem with the weather excuse: Many other carmakers had no trouble boosting sales. Nissan Motor Co. sold 11.8 percent more vehicles in January than a year earlier, Chrysler Group LLC sold 8 percent more, and Hyundai Motor Co. and Kia Motors Corp. had sales increases of 1.3 percent.

Luxury carmakers such as Mercedes-Benz and BMW also reported U.S. sales increases. The luxury brands of manufacturers such as Ford, Toyota and Honda also often did better than their mass-market nameplates. Lincoln, owned by Ford, had a 42.5 percent gain. Lexus, which is owned by Toyota, had its best January since 2008, with sales growth of about 9 percent. Honda’s Acura division was up 14.1 percent, while Nissan’s Infinity division sold 26.3 percent more vehicles. The exception was GM, where sales of Buicks and Cadillacsdeclined by 1.4 percent and 13.2 percent, respectively.

Car sales are volatile, so one month may not make a pattern. Even so, the declines among the biggest manufacturers shouldn’t be blamed on bad weather.

(Matthew C. Klein is a writer for Bloomberg View. Follow him on Twitter.)

To contact the writer of this article: Matthew C. Klein at mklein62@bloomberg.net.

To contact the editor responsible for this article: James Greiff at jgreiff@bloomberg.net.

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About Matthew C. Klein

I write about the economy and financial markets for Bloomberg View. Before that I wrote for The Economist on a fellowship provided by the Marjorie Deane Financial Journalism Foundation. I have worked at the world's largest hedge fund and read every FOMC transcript since May, 1987.
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