US March Auto Sales Drop, GM Off 13%
U.S. auto sales dropped 12 percent in March in a decline blamed on shaky consumer confidence, high fuel prices and concern that a housing market downturn could spread into a full recession.
All three Detroit-based automakers posted declines on Tuesday. Toyota Motor , No. 2 in U.S. sales behind General Motors , posted its fourth consecutive U.S. sales drop that marked the most extended downturn since 1995 for the No. 1 Japanese automaker.
GM and Toyota held out the prospect the U.S. market could stabilize in the current quarter and start to climb back as consumer confidence recovers from the battery of concerns that hit in March. Others challenged that view.
"I think the main weakness is consumer confidence," said GM sales chief Mark LaNeve. "It's (mortgages) resetting. It's worry about the news. It's presidential candidates telling you how bad it is. It's Bear Stearns."
Overall U.S. March auto sales fell 12 percent before adjusting for the number of sales days in the month, driving the full-quarter down by 8 percent from a year earlier.
Toyota, notable for its fast growth and conservative forecasting, said it would be forced to lower its forecast for U.S. industry sales of 16 million vehicles in 2008.
"We're not immune to economic cycles," said Toyota division sales chief Bob Carter.
GM reported a 13 percent sales decline for the month, Chrysler a drop of 13.2 percent, and Ford Motor a 7.6 percent decline. Toyota, which cut U.S. truck production in March, said sales fell 3.4 percent.
Japan's Honda Motor and Nissan Motor both outperformed the weak industry and increased their market share. Sales at Honda rose 4.2 percent. Nissan posted a gain of 3.6 percent.
The results underscored the continuing weakness of the U.S. industry and touched off a debate about whether the U.S. economy and auto sales would improve in the second half.
"I would like to be able to tell you that the worst is behind us, but I really can't give you that assurance," Ford marketing chief Jim Farley said, adding that availability of consumer credit remains uncertain.
"At this point, our sense is that the next quarter, the second quarter of the year, may be our most difficult of the year," Farley said.
Sales of pickup trucks and SUVs fell 18 percent in March, a trend that has hit the truck-heavy line-ups of the Detroit automakers especially hard as consumers turn to smaller sedans and more fuel-efficient crossover vehicles.
Cars, Crossovers A Lonely Bright Spot
"The compact cars and the new crossovers are really what is carrying most manufacturers," said Jesse Toprak, executive director of industry analysis for Edmunds.com, adding that the industry-wide sales decline was in line with his expectations.
"Consumers want to buy cheaper, more gas efficient vehicles," Toprak said.
Auto sales represent one of the first monthly snapshots of U.S. consumer demand and investors have looked to these early reports for signs of whether the world's largest economy has slipped further toward recession since the start of the year.
U.S. auto sales fell 2.5 percent in 2007 to 16.15 million vehicles, the second consecutive annual decline.
Industry tracking firm Autodata Corp said the seasonally adjusted annual sales rate for March was 15.1 million vehicles on an industry-wide basis, down from about 16.3 million a year earlier.
Analysts have begun to lower forecasts for 2008, with most estimates now ranging from about 15.5 million vehicles to just below 15 million for the year.
The downtrend increases pressure on Detroit-based carmakers to cut costs. Discounts, including rebates and concessional financing, have also moved higher, especially on trucks.
GM said a five-week-old strike at parts supplier American Axle & Manufacturing Holdings had cost it 100,000 vehicles of production but has not affected its sales.
Automakers raised sales incentives by 4 percent to an average of $2,519 in March from a year earlier, according to Edmunds.com.
Chrysler, the most aggressive in offering incentives, said it would retain a zero percent financing offer in April, citing evidence that tighter credit was crimping demand.
Sales comparisons for the individual automakers were adjusted for two fewer selling days in March. That adjusted basis is favored by GM, Toyota and financial analysts. The two fewer selling days accounted for a roughly 6 percentage point difference between adjusted and unadjusted sales results.