U.S. July auto sales spiral to 16-year low
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By Poornima GuptaDETROIT (Reuters) - U.S. auto sales plunged to a 16-year-low in July, led by a 27 percent drop at General Motors Corp , as high gas prices and tight credit sent the industry into a tailspin.The sales decline was steeper than analysts had expected and showed an accelerating downturn in the world's largest vehicle market as Americans abandoned the SUVs and trucks they had favored for more than a decade.July sales marked the ninth straight month of declining sales in the U.S. auto market, making it the longest such downturn since the 2001 recession.Automakers struggled to meet demand for fuel-efficient small cars and hybrids, only to see those gains wiped out by a 25 percent drop in sales of light trucks in July.Ford Motor Co sales were down 15 percent. Toyota's sales fell 12 percent.Nissan Motor Co Ltd <7201.T> surprised investors by posting an 8.5 percent increase. Honda Motor Co Ltd <7267.T> reported a weaker-than-expected 1.6 percent drop in sales, but outsold Chrysler for the third straight month.The results cast a pall over Detroit's struggling automakers as they grapple with diminished cash holdings and the costs of a downturn now widely expected to run into 2009.GM's showing came as the No. 1 U.S. automaker posted a $15.5 billion quarterly loss, attributable to a combination of meager sales and writedowns in its auto finance business.U.S. auto sales fell to a seasonally adjusted, annualized rate of 12.55 million units in July, the worst showing since April 1992."We are in a period that feels a lot like 1991 and 1992 and we had similar issues with a recession at that point in time, high oil prices and fear of oil supply shortages," said GM's sales analyst Mike DiGiovanni.TOUGH ROAD AHEADAuto executives and analysts were unwilling to call a bottom for sales.They noted there were signs that tougher credit markets and a pullback from cheaper vehicle lease financing could weigh on sales for months to come.Chrysler LLC, which boosted incentives on its vehicles in August, has completely abandoned leases. GM and Ford have tightened consumer credit terms."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.The sudden shift in buying patterns toward passenger cars hit the Detroit-based automakers hard. As a group, the market share of GM, Ford and Chrysler dropped to 43 percent in July.Light truck sales consistently outpaced car sales in the U.S. market for the decade between 1997 and 2007 when rising gas prices began to reverse the trend.But in July, cars sales outpaced truck sales by 10 percentage points at a 55 percent to 45 percent ratio. That shift has put additional pressure on earnings as larger vehicles have had higher profit margins."The next two months will be very challenging," Edmunds analyst Jesse Toprak said. "The marketplace is changing rapidly and automakers that are more flexible in their production will fare better."Toprak estimated that automakers had stepped up sales incentives by an average of 4 percent in July to $2,611 on the average vehicle. That marked the most aggressive discounting of the year for both U.S. and Japanese automakers, he said.Discounts on large SUVs ran as high as $6,199 per vehicle, followed by large trucks at $5,424, according to Edmunds, which tracks incentives including rebates and financing.(Additional reporting by Kevin Krolicki, David Bailey and Soyoung Kim, editing by Gerald E. McCormick, Leslie Gevirtz)
(c) Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
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