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Auto Sales in August Took a Plunge

Source: WSJ

Posted on 02 Sep 2010

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General Motors Co., Toyota Motor Corp. and Honda Motor Co. all reported sales declines of 25% or more while Ford Motor Co. saw its sales drop 11% for the month of August. Overall, auto sales fell 21% in August compared to a very strong month a year ago, when the federal government's "cash for clunkers" program sparked a surge in new-car buying.

Chrysler Group LLC, however, reported a 7% rise, mainly because of higher sales to corporate fleets such as rental-car companies. Chrysler also is one of the few makers that didn't see much of a lift from the clunkers program a year ago because its lineup includes few small cars, which were big sellers under the rebates.

According to Autodata Corp., automakers sold 997,968 light vehicles in August, down from 1,262,197 a year earlier. The annualized selling pace for the month was 11.47 million vehicles, in line with the pace of the last five months but down from the 14.17 million level hit in August 2009, Autodata said. Earlier this decade the industry sold about 16 million cars a year.

Despite the steep drop from a year earlier, car makers expressed confidence that the slow, steady recovery in vehicle sales remains on track. August's sales were down just 5% from July's, Autodata said.

"We're not panicking about the trend of the industry," Don Johnson, vice president of GM's U.S. sales operations, said in a conference call. "We know that it's going to be continually bumpy." He added that GM sees a "low risk" for a so-called double-dip recession.

Many consumers who would like to buy a new car are hesitating because of the uncertain economy, high unemployment, weak home prices and sliding stock market.

"I know I will buy something this year, I just don't know when," said Jill Johnson as she walked through a Ford dealership lot Tuesday with her husband, Dan, in Ferndale, Mich. "We need a new car but we are waiting."

Ford's senior U.S. economist, Emily Kolinski Morris, agreed that consumers are being "very cautious." But she doesn't see car sales stalling and instead continuing at their modest pace.

Other car makers noted that the age of the vehicles Americans are driving is rising, a sign that pent-up demand is building in the market. "We are getting to a point where people out there need to buy cars, regardless of what is going on in the economy," said Al Castignetti, U.S. sales chief for Nissan Motor Co., whose U.S. sales dropped 27% to 76,827 vehicles in August.

One indication of Americans' willingness to buy cars came from Daimler AG's Mercedes-Benz unit. The luxury-car maker said its August sales rose 15%, to 19,674 vehicles, from a year ago. The cash for clunkers program had little impact on luxury-car sales a year ago.

Mainstream brands like GM's Chevrolet, Toyota and Honda were the main beneficiaries of the clunkers program, and suffered big declines in comparison to last year's totals.

GM reported a 25% drop to 185,105 sales of cars and light trucks—ending a 10-month streak of sales increases. Last year the Chevy brand sold 80,000 vehicles with clunker rebates. But this August, sales by GM's biggest brand fell 22%.

"No one had to be a genius to see we were going to see a decline from last year. We saw a 27% drop-off of our best month in history," said Larry Kull, principal of an auto retailing group in New Jersey that has seven dealerships, including those of Toyota, Honda, Hyundai, Kia, Buick and GMC. He blamed the decline in part on a lack of vehicles available from the makers.

Toyota's sales fell 34% as some of its top-selling models plunged. Sales of the Corolla, a compact that was among the favorites of clunkers buyers, dropped 53%. Sale of the Camry fell 44%. Toyota has been battling an image problem since it recalled millions of vehicles for concerns about sudden acceleration.

On Wednesday, though, Toyota said 57% of the people who bought Toyota-brand cars in August traded in models from competitors, the highest level of so-called conquest sales since last year.

Honda's sales fell 33% to 108,729 vehicles, Autodata said.

Ford's sales fell to 157,327 vehicles. Ford's totals no longer include Volvo, which the auto maker sold last month. The company said it intends to produce about 570,000 cars and trucks in the fourth quarter, down from 574,000 from the year-ago period, as it tries to keep supply in step with demand.