August auto sales seen down as housing woes weigh
Reuters & Automotive News | August 30, 2007
DETROIT (Reuters) -- U.S. auto sales are expected to have slipped about 5 percent in August, hurt by a weakening housing market, higher gasoline prices and mushrooming consumer debt, but helped by incentive programs.
Analysts expect sales in August would have fallen further if the war on incentives had not heated up, and several forecasts expect sales for all of 2007 to fall to their lowest level in nine years.
U.S. auto sales, one of the leading indicators of consumer spending, began slowing in the second quarter and the knock-on effects of a weakening housing market and relatively high gas prices are widely expected to have capped demand in August.
"Early in August, sales were dismal. To generate showroom traffic, most automakers introduced incentives programs midway through the month," said Jesse Toprak, executive director at industry research firm Edmunds.
"That effort was relatively successful, but the uncertainty in the housing market is likely to continue suppressing consumer demand for new vehicles for some time," Toprak said.
When automakers report August sales on Tuesday, Sept. 4, Ford Motor Co. is expected to take the biggest hit in percentage terms, with sales for the second-largest automaker down as much as 16 percent.
General Motors' August U.S. sales are expected to have fallen as much as 9.5 percent, while Chrysler LLC's sales could have slipped 14 percent, analysts said.
"Housing price deflation -- coupled with higher mortgage payments -- and reports of volatility in the financial markets are weighing on consumers," Bear Stearns analyst Peter Nesvold wrote in a research note.
Mike Jackson, chief executive of top U.S. car dealership chain AutoNation Inc., said the pressure on the U.S. economy is hurting auto sales. Calling on the Federal Reserve to cut interest rates, Jackson said the economy is in danger of slipping into a recession in the absence of a cut.
FORECASTS, PRODUCTION DOWN
Earlier this month, GM and Ford lowered sales outlooks for the remainder of the year, a development that has prompted more aggressive discounting and undermines margins at a time when both automakers are struggling to return to profitability in their home market.
GM has also cut production at six plants that make pickups and large SUVs -- typically lucrative segments that have been hurt the most. A GM spokesman said the automaker might update its third-quarter production plans when it reports August sales.
"We think GM's recent truck production cut announcements imply modest risk to third-quarter production, but greater risk exists for the fourth quarter absent a recovery (in sales)," JP Morgan analyst Himanshu Patel wrote in a research note.
Industry forecasting firm CSM Worldwide said: "The deepening downturn in new housing starts, combined with soaring consumer debt triggered by rising adjustable rate mortgages, will continue to put the brakes on U.S. light vehicle sales through the remainder of 2007."
Joe Barker, senior manager of North American vehicle sales forecasting at CSM, said sluggish demand for automobiles will not recover before the fourth quarter of 2008.
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Print | posted on Thursday, August 30, 2007 3:10 PM