When U.S. auto sales soared 19 percent in May to some 1.1 million vehicles, the expansion gave the industry its strongest monthly sales in nine months and seemingly put beleaguered car companies and the shipping lines that serve them on a strong road to recovery.
The growth over last year put the automobile world on a pace of more than 11.8 million sales this year, 13.5 percent better than 2009 and the sort of recovery ports and car carriers are anxious to see.
|But it turns out the industry is hardly in the fast lane yet.
Economic woes in Europe are cutting into automotive trade worldwide, and some non-U.S. auto manufacturers are scaling back plans to invest in U.S. plants because of currency woes, a potential boon to imports except that they may be pushing goods into an uncertain market.
Mark Fields, president of Ford Americas, said his company faces a “flatlined auto market because consumers are hesitant to make big purchases.”
IHS Automotive projects U.S. auto sales growth won’t get back to 2007 levels until 2013.
“The preliminary reports on the month of June indicate that the sales rate will come out at the low annual rate of about 11.5 million units, and that’s not good,” said George Magliano, automotive economist at IHS Automotive. “We were expecting acceleration in the second half, but now the question is: Is that going to occur?”
IHS Automotive, originally a unit of IHS Global Insight, became a separate unit of its parent IHS in March when it acquired Detroit-based CSM Worldwide and merged the two auto-forecasting firms.
Auto imports, which IHS estimates fell 19.5 percent in 2009, will increase because they are capturing an ever-increasing share of total U.S. sales, but perhaps not as much as originally forecast.
IHS Automotive had forecast U.S. imports of light vehicles in 2010 would reach 3.76 million units, or 25.9 percent of the total market, but it has just scaled that forecast back to 2.86 million units, or a 24.2 percent market share. “We’ve lowered our forecasts for the share of imports because Japanese and Korean manufacturers are moving more production to the U.S.,” Magliano said. This, in turn, reduces their need to import cars.
In contrast, some European producers that had planned to move more production for the U.S. market to the United States have pulled back on those plans. The weakening of the euro has made it more expensive for them to invest in U.S. production.
Audi has put on hold until 2015 plans to produce 1.5 million cars in the U.S. after the crisis in Greece greased the euro’s recent slide against the dollar. But Audi of America’s plans to double sales by 2018 remain unchanged; that means more imports from Europe, although not enough to offset the reduction in Japanese and Korean car imports as they ramp up U.S. production.
|U.S. car exports to Europe likely will decline because of the stronger dollar against the euro; European car imports will be cheaper for U.S. consumers to purchase.
In addition, the debt crisis in the euro zone and fiscal tightening by governments will squeeze the new passenger car market in the region, which is already in retreat following the end of incentive programs, according to analysts who spoke at IHS Automotive’s Global Automotive Conference in Frankfurt last month.
Because global automakers rely on European sales for the bulk of their volumes, the debt crisis could have a big impact on the car carrier trades, analysts said. And the situation could grow worse.
U.S. auto ports are not feeling any flattening of volumes as imports and exports rebound sharply off of last year’s lows.
“We’ve just come off our best month ever in auto imports and exports combined,” said Jim White, executive director of the Maryland Port Administration, which owns the Port of Baltimore, the second-largest auto port in the United States.
Baltimore handled 38,000 vehicles in May, and its year-to-date unit volumes were up 15.6 percent for the fiscal year that began last July 1 over the prior year, albeit coming off a “devastating year last year,” White said.
“We’re down a little bit from where we’d like to be, but all the signs are encouraging,” White said. “It’s going to be a good year, but not an outstanding year, because there’s going to be some hesitation in the global consumption of vehicles after a little spike. I still think we’re two years away from getting back to where it was in 2007,” he said.
Baltimore’s auto trade is being boosted this year by increased shipments by Ford and BMW. “Everyone thinks of Ford as a domestic manufacturer, but we’ve got more imports by Ford than exports,” White said. Ford imports a van called the Transit Connect from Turkey and passenger cars from Mexico that are carried by “K” Line and CSAV ships. He expects Ford imports to double this year.
Ford’s exports to the Middle East have recovered from the recession and Chrysler is on pace to export about 65,000 vehicles this year, more than double last year’s 30,000 units. These exports also will benefit the Port of Baltimore.
The port has new volumes of cars coming in as a result of its deal with BMW, which started importing cars through Baltimore in March, and expects to bring in 50,000 vehicles this year.
The German manufacturer has signed a deal with archrival Mercedes Benz, which will process all of the BMW cars that come through Baltimore under a three-year pilot agreement. “If it works, the two companies are going to do other things together in other countries,” White said.
Baltimore beefed up its car capacity this year, signing a 50-year lease with Ports America to operate its Seagirt Marine Container Terminal. As part of the deal, Ports America, which also operates the Dundalk Marine Terminal, will shift container operations to Seagirt from Dundalk, freeing 65 acres there to be used exclusively for automobile and roll-on, roll-off cargo.
“That ends up giving us land back so we can grow our ro-ro business without losing any of our container business,” White said. “That allows us to think big and mold that into our strategic plan.”
The MPA also has leased 12 additional acres at Dundalk to Ceres Terminals, which already leases five acres there. The increased acreage will allow Ceres to offer marine terminal services to its customers under its Ceres Marine Terminal subsidiary.
As a result, Hoegh Autoliners has moved its vessel calls in its European service to Dundalk and will have Ceres handle its ro-ro cargo. Ceres Marine Terminals also will handle ro-ro and breakbulk cargo for “K” Line’s South America-Mideast service vessels and NYK Line’s South America-Europe-Middle East service ships.
Baltimore lost a major customer this year when Hyundai Motor and its logistics affiliate, Glovis of America, signed a deal to import and process 150,000 Hyundai and Kia vehicles annually through the Port of Philadelphia’s Packer Avenue Marine Terminal. “We’re devastated by them leaving because they were such a quality customer and had been growing here,” White said.
He said the gain of the BMW business will make up for the loss of the Hyundai business, which accounted for about the same annual volume.
Hyundai plans to consolidate all its imports through Philadelphia, including about 140,000 that it will shift from Port Newark.
Philadelphia is working at the Pier 98 Annex to prepare for the Hyundai and Kia imports, and the local chapters of the International Longshoremen’s Association must agree on manning levels. They hope the imports will start in mid-August.
Under the deal Hyundai signed with the Philadelphia Regional Port Authority, the new vehicles would be off-loaded at Packer Avenue Marine Terminal in South Philadelphia and moved down the street to the Pier 98 Annex for finishing touches and storage until sent, mostly by truck, to dealer showrooms. Some cars might move out by rail.
Contact Peter T. Leach at email@example.com.