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Automakers Driven to Massive Losses in July

U.S. auto sales tumbled in July, reflecting a deepening downturn in the industry, with tight credit and weak consumer confidence driving General Motors, Ford Motor and Toyota Motor to post double-digit declines.

Woman looks at new Toyota Camry on dealer lot
AP
Woman looks at new Toyota Camry on dealer lot

Nissan Motor bucked the trend with an 8.5 percent increase on strong car sales, while Honda Motor reported only a 1.6 percent drop.

July sales cast another shadow over Detroit's struggling automakers as they grapple with brutal competition, the impact of recent credit rating downgrades and a slump in demand for their most profitable products -- SUVs and pickup trucks.

GM's weak showing came as the No. 1 U.S. automaker posted a $15.5 billion quarterly loss, with plummeting sales and prices for SUVs forcing deep charges for its auto finance business.

All three U.S. automakers have pulled back on auto leases and tightened consumer credit terms to protect their balance sheets, particularly from the sharp decline in the resale values of trucks and SUVs.

Chrysler, which boosted incentives on its vehicles in August, has completely abandoned leases.

The changes on leases, most of which take effect this month, may further pressure sales for automakers, as leases often have been structured to make monthly car payments more affordable.

Ford said it expects the tougher credit environment and lease pull-back to weigh on industry sales for months to come.

"For the next several months, and I would say for the next year, the credit situation that customers are facing in dealerships will take center stage," Ford's sales and marketing chief Jim Farley said.

GM sales plunged 27 percent and Ford's sales fell 15 percent, while Toyota's sales slipped 12 percent.

The figures were not adjusted for the two extra selling days last month compared with July 2007.

Overall, total U.S. sales, including heavy vehicles, fell to between 12.7 million and 13 million on an annualized basis in July, according to Ford.

The U.S. auto market is headed for its worst year in a decade amid high oil prices, weak consumer confidence and tighter credit.

Analysts have recently cautioned that the sales decline will likely continue in 2009, with any turnaround for the U.S. auto sector only expected in 2010.

The shift toward more fuel-efficient cars has hit Detroit-based automakers and their truck-heavy line-ups particularly hard.

The automakers are slashing truck production and raising rebates on large vehicles to sell down swollen inventories.

Among vehicle segments, large SUVs had the highest average incentives -- $6,199 per vehicle sold, followed by large trucks at $5,424, according to Edmunds, which tracks incentives including rebates and concessional financing.

The average incentives offered on a new vehicle in July were up 3.6 percent to $2,611 and were the highest this year for both U.S. and Japanese automakers, it said.

GM's per vehicle incentives were the highest at $4,214 followed by Chrysler with a $3,661 average per vehicle and Ford with $3,127 per vehicle, Edmunds said.