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Economic confidence, Sandy help auto sales

| Tuesday, Dec. 4, 2012, 12:01 a.m.

DETROIT — Superstorm Sandy gave an extra boost to strong U.S. auto sales last month, although carmakers warned that uncertainty over the fiscal cliff could undo some of those gains.

Most major companies, from Toyota to Chrysler, posted impressive increases from a year earlier. Only General Motors was left struggling to explain its 3 percent sales gain and large inventory of unsold trucks.

Americans were willing to buy a new car or truck last month because they're more confident in the economy. Home values are rising, hiring is up and auto financing is readily available. The average age of a vehicle is approaching a record 11 years, so many people are looking to replace older cars.

Sandy just boosted that demand. The storm added 20,000 to 30,000 sales industry wide in November, mostly from people who planned to buy cars during the October storm but had to delay their purchases, Ford estimated. People who need to replace storm-damaged vehicles are expected to drive sales for several more months. GM estimates that 50,000 to 100,000 vehicles will need to be replaced.

November sales, when calculated on an annual basis, are likely to be 15 million or more, the highest rate since March 2008, according to LMC Automotive, a Detroit-area consulting firm. That's higher than the 14.3 million annual rate so far this year, even though November is normally a lackluster month because of cold weather and holiday anticipation.

If sales end up at 15 million for the year, it would be a vast improvement over the 10.4 million during the recession in 2009. Sales would still fall short of the recent peak of about 17 million in 2005.

But the ongoing fiscal cliff negotiations between Congress and the White House could derail the industry's recovery. The term refers to sharp government spending cuts and tax increases scheduled to start on Jan. 1 unless an agreement is reached to cut the budget deficit. Economists say those measures, if implemented, could push the economy back into a recession.

“Exactly how much growth we can expect next year will depend in part on how Congress and the president resolve the fiscal cliff issue,” said Kurt McNeil, GM's U.S. sales chief. “Markets and consumers hate uncertainty.”

McNeil and other GM executives tried to explain the automaker's disappointing performance. GM's biggest brand, Chevrolet, reported flat sales over last year despite new products such as the Spark minicar. Silverado pickup sales fell 10 percent. GM's sales have been trailing the industry all year. They were up 4 percent through October, compared to the industry-wide increase of 14 percent.

GM said its competitors resorted to higher-than-usual incentives last month to get rid of 2012 model-year trucks. GM, which had more 2013 trucks on its lots, was only offering an average of $500 per truck, or a third of what others were offering. But some analysts think GM will be forced to offer more deals in December to clear out higher-than-forecast inventory.

Asian brands also got a boost from some unusually big discounts, said Jesse Toprak, senior analyst for automotive pricing site TrueCar.com. TrueCar estimated that Hyundai and Kia, which were admonished by the government in late October for overstating gas mileage, increased incentive spending by nearly 30 percent.

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