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Detroit Three

Tax increases, impending cuts in government spending and a sluggish economy didn't stop Americans from flocking to car dealerships last month, but Canadians hesitated for the second straight month.

Single-digit sales increases by the Detroit Three and some offshore-based auto makers kept the U.S. auto-sales recovery humming at an annualized pace of more than 15 million in February, despite payroll tax increases that came into effect on Jan. 1 and cuts in government spending scheduled to begin Friday.

"It's encouraging to see that consumers may have a little bit of nerves of steel," Ellen Hughes-Cromwick, chief economist of Ford Motor Co., said during a conference call with analysts and reporters Friday.

Vehicle sales fell 3 per cent in Canada, however, with some auto makers pointing to poor weather and others noting a drop in consumer confidence. Vehicle sales have fallen 3 per cent in the first two months of 2013 in Canada after hitting the second-highest level on record in 2012.

There's not much impetus for Canadian sales to grow this year and next, Toronto Dominion Bank economist Dina Ignjatovic said in a report on the industry Friday.

"Little pent-up demand, lacklustre employment growth, a softening in the housing market and high consumer indebtedness is expected to constrain demand over the next two years," Ms. Ignjatovic wrote.

The decline in Canadian sales in February was broad based. Honda Canada Inc., Kia Canada Inc., Toyota Canada Inc. and others reported double-digit declines.

General Motors of Canada Ltd.'s sales fell 2 per cent. Chrysler Canada Inc. led the sales rankings with a 2-per-cent jump. Ford Motor Co. of Canada Ltd. posted a 5-per-cent gain to hang on to second place.

The boom in luxury sales cooled off again as well, although Jaguar Land Rover Canada ULC racked up a 90-per-cent gain in January sales and a 27-per-cent jump in Land Rover sales.

Ford led the way among the Detroit Three in the U.S. market. Sales jumped 9 per cent and led the No. 2 U.S. auto maker to announce it is boosting North American production by 9 per cent to 800,000 in the second quarter.

Pent-up demand is still driving sales because the average age of vehicles sitting in U.S. driveways is about 11 years old.

"We have not seen a February this strong since 2008, when the light-vehicle [seasonally adjusted annual rate] was 15.6 million, but the difference between then and now is that the escalator is heading up and not down," Kurt McNeil, General Motors Co. vice-president of U.S. sales operations, said on GM's conference call Friday.

Chrysler Group LLC said sales rose 4 per cent, even though chief executive officer Sergio Marchionne warned last month that plant shutdowns for model changeovers will affect U.S. sales in the first quarter.

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