No June Gloom For American Auto Sales

Recovery has been creeping at a slow pace for much of the American economy, but sales by US auto makers have revved up. Chrysler and General Motors both saw double digit growth in June, and Ford wasn't too far behind. Guest host Maria Hinojosa and NPR's Sonari Glinton talk about what's driving the rise.

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MARIA HINOJOSA, HOST:

Now, we turn to an economic story here in the U.S. June did not bring great news on jobs. Friday's jobs report showed unemployment stuck at 8.2 percent for another month. But June's figures for car sales were a ray of economic sunshine, with all of the so-called big three car companies showing significant gains. So it seems like a mixed message about the economy; lots of unemployment and lots of new cars. What gives?

We're joined now by NPR's Sonari Glinton, who follows the auto industry. Hey, Sonari.

SONARI GLINTON, BYLINE: Hey, how's it going?

HINOJOSA: So were these June numbers a surprise? I mean, we've heard stories about the auto industry coming back, but Chrysler, GM - both double digit increases, Ford not too far behind. So is this an anomaly or is this the new trend?

GLINTON: It's the trend. I mean, it's going to take a while for the auto industry to get back to where it was pre-recession days, but there's so much pent-up demand for cars. The average car on the road is over 10 years old. So people desperately need new cars and, if anything, we're going to be seeing years of people replacing their cars just because of pent-up demand.

You're going to see a real genuine comeback when people start replacing their second and buying a third car. That would be a real genuine sign of a rebound.

HINOJOSA: So it seems like the auto industry is essentially outpacing the rest of the economy. Is that fair to say? And could this be what actually pushes the economy forward? Is that possible?

GLINTON: Well, you know, many people think manufacturing is, in part, holding up the economy right now and the auto industry is, in part, holding up manufacturing. Almost all of the car makers that make cars in the U.S. have said that they're going to add jobs this summer, they're going to be adding jobs down the road. You know, companies are building plants and expanding shifts. So for a while it seems like the auto industry is sort of holding up the struggling economy.

HINOJOSA: So are you seeing it in your region? You're in Ann Arbor, Michigan, so is the state feeling it?

GLINTON: The place that's really feeling it is probably Ohio, which is where Honda is located and where Honda makes about 80 percent of its cars. You know, and all over the Midwest, all of the car companies are expanding. You know, it's not like it's going gangbusters, but Ohio, for instance, has a lower unemployment rate than the national average and Michigan's unemployment rate has been steadily going down. And, you know, it's not like it's the go-go times, but at least is not as bad as it used to be.

HINOJOSA: All right. So let's talk about what's going on with the Japanese auto makers because the numbers were really good for American auto makers, but Japanese car companies - even more dramatic sales increases. Sixty percent up for Toyota, 49 percent up for Honda. What's going on there?

GLINTON: Well, if you remember last year, there was an earthquake and tsunami, and what happened was, as you got into the summertime, that was when you started to see the effects from the supply chain and so numbers were really depressed for Toyota and Honda this same time last year. So, when we compare numbers, the Japanese auto makers are just getting back up to normal, and that's what accounts for that dramatic increase because they really had a really bad summer last year.

HINOJOSA: So here's one thing I don't understand. You know, you hear all this talk about everybody going greener and having green lifestyles. I mean, my footprint is pretty small. I live in New York. I don't drive a car, but yet everybody's buying cars, so it's again, it seems like there is a disconnect there. Who is actually buying these cars?

GLINTON: There isn't really as much of a disconnect as you might think because, you know, if you live in Michigan, there is no option to not have a car for many people. So - but what is happening, we're noticing, is that people are stepping down, so the demand for fuel efficient cars is increasing each month. That's even sort of with gas prices falling. People are stepping out of the giant SUVs into smaller SUVs. The people in smaller SUVs are going down. So, it seems as if everyone is taking a step downward.

That's a far cry from, you know, giving up your automobile altogether, but it's still a trend towards higher fuel economy. And even people who are buying those SUVs are buying much more fuel efficient SUVs.

HINOJOSA: So, Sonari, what about potential vulnerabilities for the domestic auto industry, something that might actually put a damper on this good news?

GLINTON: Well, it's what everyone is talking about. It's Europe. I mean, Europe is a really important place for all of the auto makers, especially the Americans; General Motors and Ford that have large operations in Europe. A recession in Europe affects everyone and it affects the sales, not in the U.S., but the sales of these global auto makers that sell overseas, and profits for Ford are being hurt by their problems in Europe, and the same thing with General Motors.

And then, thirdly, Chrysler is essentially holding up its European partner, Fiat, right now, which seems kind of crazy when you think about it, that a few years ago, Fiat came and rescued Chrysler. Now, Chrysler is giving Fiat a lifeline.

HINOJOSA: Sonari Glinton covers the auto industry for NPR. He joined us from member station WUOM in Ann Arbor, Michigan.

Thanks, Sonari.

GLINTON: Thank you.

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