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U.S. auto sales resilient in January

The national economy remains sluggish — but don't tell the auto industry.

Auto sales showed surprising strength in January, with all three domestic manufacturers — General Motors Co., Ford Motor Co. and Chrysler Group — reporting double-digit percentage gains. Toyota Motor Corp. and Honda Motor Co., the two biggest Japanese brands, also posted strong sales.

Overall, the industry sold more than 1 million vehicles in January, a 14.2% gain over the same month a year earlier, according to Autodata Corp.

Shoppers are streaming into showrooms, looking to take advantage of low interest rates and big leaps in fuel economy by replacing the cars they have held onto through the economic downturn.

"The year is off to a very good start," said Kurt McNeil, GM's vice president of U.S. sales operations. "There's a sense of optimism among our dealers."

So much so that the industry is starting to put billions of dollars of investment into the U.S. economy.

"Almost unlike any other industry in the United States right now, automakers are not sitting on their cash pile," said Ken Goldstein, economist at the Conference Board.

Over the last week, GM said it would invest $800 million in a Kansas City, Kan., factory and a test facility in Pontiac, Mich. It plans to launch an additional $700 million of North American plant and facility investments this year.

Chrysler will add shifts and a combined 2,100 jobs at factories in Warren, Mich., and Toledo, Ohio, this year. Ford plans to hire 2,200 salaried workers in the U.S. this year, its largest increase in salaried workers in more than a decade.

The investments are taking place in the industrial Midwest, among the regions hit hardest by the most recent economic turndown, Goldstein said. That's particularly good for the U.S. economy, he said, which contracted slightly in the last quarter of 2012.

"It would be difficult for the economy to get back to a 2.5% growth rate without a healthy auto industry," Goldstein said. "It makes it a lot easier."

A booming domestic auto industry contrasts with recession-plagued Europe, where sales are plunging and automakers are piling up losses.

Ford lost almost $1.8 billion in Europe last year and expects to lose an additional $2 billion this year. It plans to lay off 6,200 workers as it closes assembly plants in Genk, Belgium, and Southampton, Britain, as well as a parts operation in Dagenham, Britain. GM is expected to announce losses from its European operations when it releases fourth-quarter financial data this month.

Strong sales and profits in the U.S. are more than offsetting losses suffered by Ford and GM in Europe.

GM's U.S. sales rose 15.9% in January to 194,699 vehicles compared with the same month a year earlier. Ford sales rose 21.7% to 165,683, according to Autodata, its best January since 2006. Chrysler Group also had its best January in five years, with sales rising 16.4% to 117,731.

Japanese automakers also fared well. Toyota's U.S. sales rose 26.6% to 157,725 vehicles in January. Overall, the sales pace exceeded Toyota's expectations for the industry, said Bill Fay, Toyota's U.S. general manager. Honda sales rose 12.8% to 93,626.

Even luxury brands posted big gains. Jaguar Land Rover's sales rose nearly 25% last month. Porsche sales soared almost 32%.

Cars are selling because the economy is much better off than most people realize, said Beth Ann Bovino, senior economist at Standard & Poor's.

Concerns about the so-called fiscal cliff pushed consumer confidence down in January to its lowest level since late 2011, according to a widely watched barometer from Thomson Reuters and the University of Michigan.

But that really reflects two factors: people's fears about how Congress and the Obama administration resolve their budget battle, and the end of the payroll tax holiday Dec. 31, Bovino said.

"The jobs market is healing, and that bodes well for consumer spending down the road," she said.

Employment grew at an average 181,000 jobs a month last year, and although that is under the 200,000 average target economists consider healthy, it still represents steady growth, Bovino said.

"I think we are at a tipping point," Bovino said. "Spending on an automobile is a big-ticket item, it takes a lot of confidence to get out there and put a lot of money down."

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