Drop In Auto Sales Slows

Ford Posts Smallest Decline In A Year As Others Show Results Better Than Past Months

July 02, 2009|By Sun staff and Tribune Newspapers

Auto sales in the U.S. remain severely depressed, but results released by automakers Wednesday pointed to what could be the first signs of a recovery after a long and bleak run.

The industry as a whole declined 28 percent in June compared with a year ago, according to Autodata Corp., with 859,847 cars and light trucks sold, its smallest dip since September.

Ford Motor Co., the nation's second-largest automaker, led the way, with a modest 11 percent decline in sales in June, compared with a year earlier, its smallest slide in more than a year. It attributed the increase to a strong product mix and is responding by boosting production in the third quarter.

And while General Motors Corp. and Toyota Motor Corp. saw more substantial dips, of 34 percent and 32 percent, respectively, both showed improvement over recent months' dismal results, among the worst in their histories.

Among other large automakers, Chrysler Group, which along with GM filed for bankruptcy this spring, said its sales fell 42 percent on the month, and Honda Motor Co. saw a decline of 29 percent compared with June 2008. Nissan Motor Co. sales were down 23 percent.

"The tide seems to have shifted in recent weeks," said Jim Farley, Ford's head of marketing and communications. "We remain grounded, however, given challenging industry and economic conditions." Executives at the automakers attributed the slight improvements to an improving - or at least stabilizing - economic outlook. Toyota and Nissan also said that availability of credit to consumers, which had been deeply restrained, was looking up.

Executive optimism aside, the market continues to hover far below even what would have been called depressed levels a year ago. On an annualized basis, industry sales in June hit a level of 9.7 million units, according to Autodata, which is down 40 percent from the industry's sales rate for most of this decade.

Baltimore-area dealers said they're expecting a boost in July from the federal Cash for Clunkers program, which gives customers $3,500 or $4,500 off a new, fuel-efficient vehicle in exchange for trading in a gas guzzler.

At Adams Suzuki in Fallston, customers have already begun asking about the program, including one woman who stopped in Wednesday to look at a Suzuki sport utility vehicle, which she said she plans to buy once the program starts. She said she'll trade in a 1999 GMC Sierra pickup that gets only 16 miles per gallon.

"She's got a vehicle that's going to qualify her for some savings - it was beat up and rusted, but it runs," Adams' Larry Lambdin said.

He said dealers that sell a lot of fuel efficient cars should benefit from the government program. "It's going to be a good shot in the arm," he said.

Adams Suzuki had some of its worst months over the winter but sold more cars in June than in the previous month and about 10 percent more than in June 2008, Lambdin said.

"There's a little bit of a pent up demand," said Lambdin, who said vehicle sales started slowing in November. "But it's to a point now where there is a segment of people that has started to realize they do need to replace their cars, and confidence in the auto industry is starting to be felt again. It's easier for consumers to make buying decisions once they understand the vehicles they purchase will not become obsolete."

He said he is seeing more interest in compact models, with financing deals helping to persuade customers to buy.

Jeff Grossman, a vice president at Norris Auto Group in Baltimore, which sells Honda, Ford, Nissan and Acura brands, said he senses the auto sector is close to reaching a bottom and said his group saw an increase in May and June.

"Consumer attitudes seem to be better," he said. But "I think it's going to be a slow recovery. It's not going to be a smooth and steady line on the graph. One month will be good and the next month might not be as good."

He said one challenge has been shrinking inventory as manufacturers have slowed production.

"When you have a good month, you may not be prepared for the following month, when inventory may not support demand," Grossman said.

That has happened to some extent with the Ford Expedition, a large SUV. He has customers who have placed orders and now have to wait.

"I don't have one Ford Expedition in stock, and it's difficult getting them from Ford Motor Co.," he said. "Ford has cut back production drastically. I've got orders pending that Ford is very slow in fulfilling."

But with gas prices creeping back up, generally consumers are more interested in smaller or crossover vehicles.

"People are much more sensitive to the cost of fuel today than they have ever been," Grossman said.

Baltimore Sun reporter Lorraine Mirabella contributed to this article.

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