U.S. Auto Sales May Hit 28-Year Low as Discounts Flop By Keith Naughton and Tim Higgins - Aug 31, 2010 9:39 AM CT
U.S. Auto Sales May Hit 28-Year Low in August
Chrysler was the only U.S. automaker to reduce sales discounts from last year. Photographer: Jim R. Bounds/Bloomberg U.S. Auto Sales May Hit 28-Year Low in August
Ford Motor Co. may have posted a smaller sales decline from last August than the overall industry. Photographer: Jonathan Alcorn/Bloomberg
U.S. auto sales in August probably were the slowest for the month in 28 years as model-year closeout deals failed to entice consumers concerned the economy is worsening and they may lose their jobs.
Industrywide deliveries, to be released tomorrow, may have reached an annualized rate of 11.6 million vehicles this month, the average of eight analysts’ estimates compiled by Bloomberg. That would be the slowest August since 1982, according to researcher Ward’s AutoInfoBank. The rate would be 18 percent below last year’s 14.2 million pace, when the U.S. government’s “cash for clunkers” incentive program boosted sales.
“Home sales are way down, the stock market is way down, the unemployment report is very disappointing and consumer confidence is sputtering,” Jesse Toprak, vice president of industry trends at TrueCar.com, said in an interview. “People just don’t want to make big-ticket purchases because they’re uncertain about their jobs and the value of their homes.”
While automakers increased discounts by 1 percent from July to an average of $2,864 per vehicle, sales to individuals probably fell 7 percent from last month, according to Santa Monica, California-based TrueCar.
Consumers are avoiding showrooms as fear of a double-dip recession grows following the 27 percent plunge in existing home sales in July, said Mike Wall, an analyst for IHS Automotive. The U.S. unemployment rate in July held at 9.5 percent, near a 26-year high of 10.1 percent. The Conference Board reported today that consumer sentiment rose to 53.5 this month from a five-month low of 51 in July. Fewer Americans said jobs were plentiful in August.
‘Tough Sell’
“When you’ve got that sentiment, that fear hanging over the market, it makes it a tough sell for consumers” to spend $25,000 or more on a vehicle, said Wall, who is based in Grand Rapids, Michigan.
Ford Motor Co. is set to announce its fourth-quarter production schedule tomorrow, said George Pipas, the automaker’s sales analyst. Ford will build 575,000 cars and trucks in the final three months of the year, up slightly from 574,000 a year earlier, Joseph Amaturo, an auto analyst for Buckingham Research Group, wrote today in a research note. Ford may also boost third-quarter production, now scheduled for 570,000 vehicles, Amaturo said.
‘Light’ Inventories
“Ford’s inventory levels remain healthy, if not ‘a little’ light among select vehicles,” wrote Amaturo, who is based in New York.
Ford may have posted a smaller sales decline from last August than the overall industry, and Chrysler Group LLC may have increased deliveries.
Ford, helped by new models such as the Fiesta small car, will post a 5.2 percent sales drop, the average of six analysts’ estimates. Chrysler, aided by deliveries to large buyers such as rental-car companies, will have sales increase 3 percent, the average of six estimates. General Motors Co. will fall 19 percent, the average of four estimates, in line with the industrywide drop.
Ford doesn’t expect a double-dip recession, and sales to fleet buyers have been “robust” this year, said Mark Fields, the automaker’s president of the Americas.
“We’ve said it’s going to be a modest recovery,” Fields said Aug. 25. “We’re seeing a modest recovery.”
Fleet Sales
Sales to rental-car companies, business and government, also known as fleet sales, will account for 20 percent of August deliveries, up from 15 percent in July, Credit Suisse Group AG auto analyst Chris Ceraso wrote in an Aug. 26 report.
Fleet sales, especially to rental-car companies, have helped prop up the market as individual customers stay away, said Sophia Koropeckyj, managing director of Moody’s Analytics.
“Consumers are still under a considerable amount of strain and they do not have much appetite or ability to purchase new vehicles,” said Koropeckyj, who is based in West Chester, Pennsylvania.
Sales in August have dropped from July at Carl Galeana’s three Chrysler dealerships in Michigan, South Carolina and Florida.
“There’s still that psychology out there of doom and gloom,” he said. “People who are buying the cars now, need to buy a car. If you don’t need to buy a car, you’re probably sitting back.”
Stimulus Package
United Auto Workers President Bob King said Congress needs to pass a stimulus package that creates jobs and bolsters consumer confidence.
Auto sales “are not going as well as they should,” King told reporters Aug. 27 in Wayne, Michigan. “Consumers are not going to buy vehicles if they don’t have jobs or aren’t confident in their job.”
Sales by Japanese automakers, which benefited from the “cash for clunkers” program, will fall more than the overall market, analysts said. Toyota Motor Corp.’s deliveries may drop 29 percent and Honda Motor Co. may decline 27 percent, the average of four analysts’ estimates. Nissan Motor Co.’s sales may slide 24 percent, the average of four estimates.
Toyota’s share of the U.S. auto market will sink to 15.6 percent from 17.9 percent a year ago, the largest decline among major automakers, TrueCar estimates. Toyota recalled 1.1 million Corolla and Matrix models last week for problems with stalling, which adds to the more than 8 million vehicles it recalled in the last year for defects linked to unintended acceleration.
‘Surprisingly Weak’
Toyota’s “surprisingly weak” sales also could be driven by “sharply increased competition from Honda, which started offering very generous deals to buyers,” Barclays Capital analyst Brian Johnson wrote in a note last week.
Honda boosted discounts by 66 percent from a year earlier while Nissan raised incentives 28 percent, and Toyota lifted them 27 percent, TrueCar said.
Chrysler was the only U.S. automaker to reduce sales discounts from last year, with a 22 percent decline, while its average of $3,798 per vehicle still was the highest in the industry, according to TrueCar.
GM increased incentives 18 percent to $3,763 per vehicle and Ford boosted discounts by 25 percent to $3,008 per vehicle, according to TrueCar.
“The deals are out there,” said Jessica Caldwell, director of pricing and industry analysis for researcher Edmunds.com in Santa Monica, California. “People just can’t be bought or enticed.”
Frank Ursomarso, a GMC-Buick and Honda dealer in Wilmington, Delaware, said he is doubling his marketing budget to try to stimulate sales. He’s offering no-money-down leases, a back-to-school discount to teachers and advertising a $6-a-day payment on Honda Civics.
“I’m sick and tired of just sitting there day after day and getting beaten down,” Ursomarso said. “It’s a big risk because it’s a lot of money to be spending at a time like this. But I can’t stand this anymore. I’m going to fight.”
The following table shows estimates for car and light-truck sales in the U.S. Estimates for companies are a percentage change from August 2009. Forecasts for the seasonally adjusted annual rate, or SAAR, are in millions of vehicles.
Worst sales in 28 years? Worst homes sales in recorded history (back to back mind you)?
So all that government intervention was for naught. But we've had a Democratic Senator tell us all that debt got us **SHIT**.
A pack of drunks. That is what our nation has come to become, just like a bunch of heroin addicts, only this time the drug is debt.
