Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, July 7, 1993                   TAG: 9307070103
SECTION: BUSINESS                    PAGE: B-6   EDITION: METRO 
SOURCE: Knight-Ridder/Tribune
DATELINE: DETROIT                                LENGTH: Medium

AUTO SALES A SURPRISE: THEY'RE GOOD

"It's one area of strength in an overall weak economy," said David Garrity, auto analyst for McDonald & Co. Securities in Jersey City, N.J. "The question is: How long can it continue?"

Pent-up demand, low interest rates and the surging popularity of leasing are fueling the rebound. The skyrocketing yen has helped Ford and Chrysler - and it has hurt Honda and, to a lesser degree, Toyota, who see their costs and their sticker prices rise beyond what many consumers can afford.

But the biggest factor is that many people's wheels are just wearing out. More than one of every five cars on the road, or 20 percent, are now 12 years old or older, said John Casesa, auto analyst for Wertheim Schroder & Co. in New York. That's up from 12 percent in 1980.

Leasing, once used almost exclusively to move luxury cars off the lot, has spread throughout the product lineup to make cars more affordable for the willing buyer, even as sticker prices have jumped.

For Jack Demmer, a Ford dealer in Wayne, Mich., leases account for half of all sales, up from 20 percent a year ago.

The advantage of leasing is that buyers make what often is only a token down payment, and monthly payments are lower than what they would face on a comparable loan to buy a new car. But the customer must lease again or buy when the lease runs out.

The big risk for automakers is that so many two- or three-year lease cars come back onto the used-car market that bargain hunters will choose them instead of new cars a few years from now.

Halfway through 1993, industry sales ran at an annual rate of 13.6 million cars and trucks, or 8.4 percent ahead of last year's pace.

But the pace quickened in June, fueled by a growing infatuation with minivans, sport-utilities and pickup trucks. The Big Three automakers plan to build more than 1 million trucks by September, which would be the highest third-quarter truck output in the industry's history.

Garrity expects car and truck sales for the year to reach 14 million, up from 12.9 million last year and 12.3 million in 1991, the trough of the recession.

That's still far from the peak of 16.3 million in 1986.

So far, this recovery belongs to Chrysler and Ford. Less than one year after introducing its make-or-break LH sedans, Chrysler's market Leasing, once used almost exclusively to move luxury cars off the lot, has spread throughout the product lineup to make cars more affordable for the willing buyer, even as sticker prices have jumped. share in the United States has catapulted from 13.3 percent to more than 15.6 percent.

Ford has picked up more than a full percentage point, ending the first half with about 25.4 percent of all new car and truck sales, up from 24.3 percent a year earlier.

General Motors is running about one point behind last year's pace, at 34.5 percent. But it is selling more cars to individuals at a profit and far fewer to daily rental agencies to whom GM offers such a large discount that it has lost money on most of them.

On such models as the Chevrolet Cavalier, Pontiac Sunbird and Buick LeSabre, GM has adopted a "value pricing" strategy that replaces an often confusing array of rebates with a lower sticker price. The result: Cavalier sales are up 26 percent for the first half of the year, Sunbird is up 19 percent and LeSabre is up 15 percent.

"Given people's budgets these days, that kind of approach is exactly what many consumers are looking for," said Garrity.