Higher New-Car Prices Fuel Bigger Profits for U.S. Automakers

Higher New-Car Prices Fuel Bigger Profits for U.S. AutomakersAverage transaction prices for the big three U.S. automakers — GM, Ford and Chrysler — are on the rise, and that’s pumping up profits as well.
The three automakers reported higher operating profits for the third quarter, mostly from impressive sales in the domestic market.
North American profit margins were some of the best in years. General Motors’ margin was 9.3 percent (before interest and taxes); Ford Motor earned 10.6 percent pre-tax and Chrysler earned 4.9 percent.
Combined, GM, Ford and Chrysler earned about $5.7 billion in pre-tax profit in North America in the third quarter. That’s up $1 billion from a year ago.
Meanwhile, the average transaction price for a GM, Ford or Chrysler car or light truck in the third quarter was $33,833, up from $33,151 a year ago, says Kelley Blue Book.
KBB projects that U.S. new-car sales should begin to bounce back in October, despite the federal government’s shutdown earlier in the month. This would follow the first year-over-year decline in 27 months in September.
New-vehicle sales are expected to improve 11.7 percent in October to a total of 1.22 million units.
“The government shutdown didn’t impact consumers growing appetite for buying new vehicles,” said Alec Gutierrez, senior analyst for Kelley Blue Book.  “The expectations were that car buyers would wait on the sidelines, but because of pent-up demand and credit availability, car sales are expected to increase 7 percent from last month.”

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