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Chevy Cruze cruises to top spot as Japan disruption continues

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Chevrolet's new compact Cruze was the best-selling car in the United States in June, new sales data show, cruising past perennial chart-toppers like the Toyota Camry.Gm / Wieck

For the first time in years, a U.S. automaker has topped the passenger car sales charts.

Chevrolet's new compact Cruze was the best-selling car in the United States in June, new sales data show, cruising past perennial chart-toppers like the Toyota Camry and Honda Civic.

Chevy’s small car surge reflects parent General Motors’ increasing emphasis on small, fuel-efficient passenger cars. But the Cruze is also benefiting from an ongoing shortage of key Japanese models, including the 2012 update of the Civic.

GM — like the other domestic automakers — meanwhile, has seen a sharp build-up in inventory of unsold pickups and other trucks in recent months, a development that could produce problems going forward, especially if fuel prices surge again.

“With continued strong consumer demand for GM’s fuel-efficient vehicles, June was another solid month for us,” said Don Johnson, the carmaker’s vice president for U.S. sales operations. “The month caps a successful first half of 2011 for us in the U.S. market — our sales are up and we’ve gained share profitably.”

Chevy’s Cruze, the new compact model GM introduced last year, was not only the best-selling passenger car in the U.S. in June, it was also the third-best seller overall, coming in behind the Ford F-Series and Chevrolet Silverado pickups.

Sales totaled 24,896, about 1,100 more than the bigger Chevy Malibu and well ahead of the Toyota Camry. Normally one of the nation’s top-selling cars, the Camry squeaked into eighth place for June, with sales of 21,375, although the Toyota sedan still leads the passenger car ranks for the year.

Toyota sold 147,469 Camrys in the first six months of 2011, representing a 5 percent year-over-year decline and reflecting the ongoing production shortages plaguing many of the major Japanese carmakers. With 122,972 models sold so far this year, the popular Japanese sedan is still ahead of the diminutive Cruze.

The Honda Civic, meanwhile, fell out of the Top 10 list in June, where it normally ranks close to the Camry. Honda’s top American executive, John Mendel, recently warned that production of the 2012 Civic update won’t be back to normal until “sometime in the fall.”

Japanese makers, working with suppliers hard hit by the March 11 earthquake and tsunami, have been pushing to get their assembly lines rolling as quickly as possible and now expect to be back up and running more quickly than earlier projections.

As a result, “we believe that June likely marked the nadir” for the Japanese downturn, predicted auto analyst Rod Lache, of Deutsche Bank. That could be good news for the industry as a whole, as shortages appear to have played a significant role in the unexpected downturn in U.S. auto sales in May. June’s numbers were up, but still lagged the pace from earlier in 2011.

With Japanese production closer to normal, added Lache, “We expect [seasonally-adjusted sales rates] to accelerate — possibly to above trend levels.”

With more Civics and Toyota Camrys and Corollas now expected to arrive on dealer lots, it’s anyone’s guess as to what the Top 10 list will look like in the months ahead. Data from Experian Auto and other industry sources suggest that the Detroit automakers have “conquested” relatively few Japanese buyers unwilling to wait out the shortages. (Hyundai has done a more effective job of winning over import buyers, analysts say.)

Nonetheless, Detroit’s “Big Three” automakers are hoping to continue gaining momentum in the small passenger car segments, and there are signs that the domestic carmakers’ newest offerings are connecting with the automotive world’s equivalent of independent voters.

Ford, which continued to lead the June sales charts with its F-Series pickup truck — the nation’s best-selling car for more than a quarter century — also saw three other vehicles land in the month’s Top 10, including the small Ford Escape crossover, at fifth, the ninth-ranked Fusion midsize sedan and, in sixth place, the all-new Focus compact.

The timing of the introduction of the Cruze, Focus and Chrysler’s new 200 sedan is critical, notes automotive industry analyst Aaron Bragman of the consulting firm IHS, since small cars are collectively becoming the fastest-growing segment in the U.S. vehicle market.

It’s a niche Detroit’s carmakers have traditionally avoided because of the relatively low profitability of products like the Cruze and Focus compared with trucks like the F-Series and Silverado.

Domestic carmakers have improved the business case for such models by adopting global designs and production strategies that “dramatically improve economies of scale,” explains Derrick Kuzak, Ford’s global product development czar.

It also helps to have new, lower-cost, higher-productivity labor agreements in place with the United Auto Workers Union.

In 2006, prior to the industry meltdown that drove GM and Chrysler into government-controlled bankruptcies, the all-in labor cost for a typical Big Three worker was around $76 an hour. It’s now closer to $52, according to various industry estimates. And it’s even lower at some plants, such as the suburban Detroit line producing Chevy’s new Sonic minicar. Here, many line workers are getting half the standard pay due to a new two-tier wage program.

U.S. automakers have not abandoned trucks entirely. The June sales numbers underscore a continuing demand. Nonetheless, truck sales are still well short of what they were before gas prices surged to near-record levels. And that means inventories have been rising to uncomfortable levels not seen since before those 2009 bankruptcies.

At the end of June there was a 122-day supply of Chevrolet Silverados and GMC Sierras. The industry generally considers a 60 to 70-day supply normal, although GM now insists it’s comfortable with 100 to 110 days of pickups.

GM’s Johnson and other Detroit officials insist they are trying to match production to demand, rather than trying to force the market to sop up excess production. The concern is that if demand drops further it could force domestic automakers to dole out the sort of budget-busting incentives that got them in trouble prior to the industry downturn.

And that could more than wipe out the profits the manufacturers can eke out on their increasingly popular small cars.