Auto Makers Seen Ending Quarter on a Down Note
Major automakers are expected to report lower U.S. vehicle sales for March Tuesday, ending the first quarter on a weak note and adding to evidence that the housing slump and tighter credit have crimped demand.
A sharp decline in March sales could also heighten concerns that the world's largest market for cars and trucks is on track for its weakest year since 1994, a downtrend that increases pressure on the Detroit-based automakers to cut costs further.
"Consumers feel there is no compelling reason to buy a car right now," Jesse Toprak, executive director of industry analysis for Edmunds.com, said in a research report.
"Some shoppers seem to be waiting for dramatic incentive announcements that seem inevitable, while others are likely more focused on general economic and financial concerns."
Analysts expect U.S. car and light truck sales to drop more than 6 percent in March from a year earlier after adjusting for two fewer selling days compared with last year.
Auto sales represent one of the first monthly snapshots of U.S. consumer demand and could provide more support for the view that the world's largest economy tipped into the start of a recession in the current quarter.
General Motors and Ford Motor shares have dropped 24 percent and 16 percent respectively since the start of the year, reflecting increasing investor concern about the weakness of the economy.
In a note for clients issued Monday, JP Morgan analyst Himanshu Patel said the price decline had been accompanied by increasing short positions in both stocks.
Patel said short interest in Ford had reached the "highest level in recent memory," while short interest in GM was the highest since January 2006, when investors were concerned about an imminent bankruptcy filing by the embattled No. 1 U.S. automaker.
Patel said if March sales show the U.S. market stabilizing, that could pave the way for a rebound in both stocks. But he cautioned that an industry-wide, annualized sales rate of fewer than 15 million units for March would add to concern "about the depth of the current slowdown."
Other analysts see annualized sales for March at between 14.9 million units and 15.6 million, compared with 15.2 million in January and 15.3 million units in February.
Again in March the industry's woes are expected to have taken the heaviest toll on Detroit automakers, which have been losing share to Japanese rivals led by Toyota Motor.
March sales at GM are seen down between 8 percent and 9 percent, with Ford Motor sales expected to be down as much as 10 percent and sales at Chrysler off by as much as 13 percent from a year earlier, according to analysts.
Toyota , now the No. 2 player in the U.S. market, is likely to report its sales have fallen as much as 6 percent, while Nissan Motor is seen on track for declines of up to 3 percent, analysts said.
Gloom and Doom
The gloomy outlook comes at a time when continued weakness in consumer confidence, turbulent credit markets and rising gasoline prices are prompting analysts to significantly lower their expectations for overall 2008 sales.
J.D. Power and Associates cut its forecast for 2008 sales to 14.95 million vehicles earlier this month, down from an earlier estimate for 15.7 million. The tracking service has also said U.S. retail sales, which exclude sales to fleet operators, were down in the first two weeks of March.
U.S. auto sales fell 2.5 percent in 2007 to 16.15 million vehicles, the second consecutive annual decline.
Honda Motor could be the only major automaker to post sales gains in March, helped by continued strong sales of the Civic and Fit small cars, analysts said.
Honda was also the only one of the major six automakers to post higher sales in February.