Canadian heads of Detroit big three foresee little sales growth in 2012

Canadian drivers will continue to be frugal when shopping for vehicles, leaving little room for growth in 2012, the Canadian presidents of North America’s largest automakers said.

Automakers are bracing for another tepid year as consumer confidence in the world economy remains shaky, the Canadian heads of the so-called Detroit big three automakers said in interviews from the city’s annual auto show.

“Would we like to see the industry growing like in the United States and other parts of North America and around the globe? Absolutely. But our best analysis says that we’re going to be flat to slightly down,” General Motors Canada president Kevin Williams said.

Some markets like China are seeing soaring growth as they develop their auto industries, while growth in the U.S. is outpacing that in Canada because its market dipped much more than Canada’s during the recession and are just starting to climb back.

Meanwhile, Canadians are dealing with record high personal debt, a rising unemployment rate and forecasts for slowing economic growth in 2012.

Automakers sold 1.59 million vehicles in Canada last year, up 1.8 percent from 1.56 million in 2010.

The figures for 2011 far outpaced the 1.46 million sold in 2009 – the worst sales year for the industry since 1998. But 2011 sales were well short of their pre-recession levels.

Dianne Craig, the newly appointed CEO and president of Ford Motor Company of Canada is slightly more optimistic than Williams, and predicts another year of modest growth of one to two percent in 2012.

“We’re not going to see big increases in the industry size to where it was four or five years ago,” she said.

Craig, the former general manager for the southeast market in the U.S., said the biggest difference she has noticed since moving north of the border is the Canadian penchant for smaller cars.

Reid Bigland, president and CEO of Chrysler Canada, said he expects growth of between minus two and plus two percent as Canadians remain cautious about vehicle purchases.

“There’s a much bigger slant in Canada toward small and compact vehicles, and I think that’s to a certain extent to do with a little bit less disposable income in Canada and a more conservative culture,” he said. “I think it’s going to continue to be how people feel about their jobs, the stock market and how secure they feel…If employment can hang in there in Canada, the economy and new vehicle sales will hang in there as well.”

Analysts have also predicted 2012 sales will be roughly in line with 2011 as a recession in Europe, slower growth in emerging markets and an uncertain economic and political climate in the U.S. continue to weigh on consumer sentiment.

Automotive consulting firm DesRosiers has predicted a similar year. It projected vehicle sales will rise one percent or 15,000 from 2011 to 1.6 million vehicles.

However, there are some reasons that sales could surprise on the high side, said the firm’s president Dennis DesRosiers.

The scenarios that could push growth higher include: if the U.S. and European economic situations improve; more people grow tired of their aging vehicles; and Japanese automakers see a big surge in demand following last March’s earthquake and tsunami, which crippled parts production.

“We are maintaining our view of a positive but low growth light vehicle market for 2012, but if all these stars line up, then we could see quite a nice surprise with new vehicles sales coming in anywhere from 20k to 80K higher than our forecast,” he wrote in a report.

“I wouldn’t count on it, but there are reasons to be more optimistic than any time in the last five years,” he said.

GM’s Williams noted that the Canadian market is much more stable than the U.S. market, where each manufacturer is struggling to gain a bigger piece of the market as it grows in the double-digits.

He said incentives offered by foreign automakers trying to take a bigger market share, like Hyundai, could fuel a small, but not significant increase in discounts and other promotions.

Canadian drivers, meanwhile, are watching their pennies and looking for the best values – not necessarily the cheapest deals.

“I think that’s what we’re going to see with the Canadian consumer going forward through this tough economic climate where there is a lack of confidence and uncertainty around the global markets,” Williams said.

However, he believes GM Canada will be able to seize the opportunity to improve this year and recover from a 1.7 percent decline in 2011 year-over-year sales and a 0.5 percent drop in market share.

Williams said the 2011 losses came as the automaker continued to phase out its Pontiac brand as part of its restructuring.

Chrysler’s Bigland said the company, one of the biggest market share gainers in the Canadian market last year, is unlikely to offer major incentives in 2012, as its goal is profitability, not growth at any cost.

Ford’s Craig, who took over the top position from David Mondragon on November 1, said there could be some upside to the low growth forecasts, as Canada’s economy is in better shape than the U.S.

Ford of Canada, which claimed the title of Canada’s top-selling automaker in 2011 for the second year in a row, will continue to build on its momentum in 2012 with a focus on working to grow its reputation in the car segment as its truck business continues to do well.

Ford, the only of the big three Detroit automakers that did not have to resort to a government bailout in 2009, has been quicker to focus on a new product line that is centred on more fuel efficient vehicles, a demand that is rising as consumers worry about rising gas prices.