GM, Ford report lower US auto sales in May
General Motors Co and Ford Motor Co reported slightly lower US vehicle sales in May as broader economic weakness and higher vehicle prices prompted consumers to delay major car purchases.
June 02, 2011 / 10:19 IST
General Motors Co and Ford Motor Co reported slightly lower US vehicle sales in May as broader economic weakness and higher vehicle prices prompted consumers to delay major car purchases.
Monthly car sales figures are among the first snapshots of consumer demand in May. Downbeat economic data in recent days, from weak private-sector hiring and slowing manufacturing output to shrinking consumer confidence and a drop in single-family home prices, has raised concerns that the US recovery is running out of steam."The slowdown in the economy and high oil and gas prices -- that obviously hurts where they make most of their profits in the bigger trucks," said Mirko Mikelic, portfolio manager at Fifth Third Asset Management. "We're hitting a soft patch in the economy and it will hit a lot of the auto companies."GM sales chief Don Johnson projected the annualized vehicle sales rate industrywide for May would be between 12 million and 12.1 million including heavy-duty trucks. Johnson added that the industry would probably be under 13 million for "the next couple of months.""There's been a lot of recent key data that's come in a little weaker than we expected," Johnson told analysts and reporters on a conference call on Wednesday. "We continue to believe that the recovery remains on track, but clearly we also see some challenges that we need to overcome."GM shares were down 3.1% at USD 30.83 in afternoon trading while Ford shares were down 3.5% at USD 14.40. The S&P 500 was down 1.6%.Incentives, which lower the price of a vehicle, fell sharply in May. Data firm TrueCar.com estimated that the average transaction price for light vehicles in the United States was USD 29,817 in May, the highest ever recorded in data going back to 2002."Early in the month, consumers sat on their hands," Johnson said.GM sold 221,192 vehicles in the month, down 0.5% from 222,305 in May 2010 excluding four brands the company no longer sells.The figure fell short of Wall Street and industry forecasts, which had predicted total sales ranging from about 225,000 estimated by data firm TrueCar.com to 242,000 forecast by Jefferies.Ford sold 192,102 cars and trucks in May, down 0.1% from 192,253 a year earlier. This fell short of the 195,000 vehicle sales projected by Barclays Capital, but was above the 188,280 sales figures estimate from TrueCar.com.Chrysler Group LLC said its May US vehicle sales rose 10% from a year ago to 115,363, driven by a 55% jump in sales of Jeep models. Volkswagen of America sales rose 27.9% to 30,100 vehicles. But Nissan Motor Co, based in Japan where the March 11 earthquake disrupted production across many industries, said US sales fell 9.1% in the month to 76,148."As inventories normalize in the next few months, we're all going to be forced to do what we do best and that's compete," said Al Castignetti, Nissan's North American sales chief. Asked if that meant that industry incentives would have to rise, he replied, "Yes, absolutely."Economists polled by Reuters projected the industrywide annualized sales rate would be around 12.6 million in May, 8.6% higher than in May 2010.If these forecasts prove true, this will be the first time the annualized sales rate has dropped below 13 million since February.Japanese auto sales fell by a third in May to the lowest total for the month since 1968, as carmakers struggled to restart production after the earthquake and tsunami that roiled the country in March. But South Korean carmakers continued to gain traction, with Hyundai Motor and affiliate Kia Motors posting double-digit sales growth, driven by solid demand for new models.In France and Spain, car sales tumbled as government incentives to replace old models came to an end. French sales fell 8.3% on an adjusted basis, while sales in Spain slid 23.3%, the 11th straight monthly drop. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
