Consumers Hold Off on August Car, Truck Buys: Sales Expected to Decline By 14.4%
Friday, August 29, 2008 3:08 PM
Symbols: F, GM, HMC, LEH, TM
(Source: Detroit Free Press)trackingBy Sarah A. Webster, Detroit Free Press

Aug. 29--As Detroit's automakers race to offer more fuel-efficient cars in the face of one of the most challenging economies in recent memory, droves of consumers continued holding off on the purchases of big cars and trucks in August.

That will translate into an industrywide sales decline of 14.4% when automakers report their monthly sales figures on Wednesday, the consumer automotive Web site Edmunds.com estimated on Thursday.

Don't expect to see a major recovery for the remainder of the year," Jesse Toprak, executive director of industry analysis for Edmunds.com, said in a report that predicted the biggest sales declines would be on the backs of Detroit automakers, who have been losing sales all year.

Edmunds.com estimated that August sales would fall by 34% at Chrysler LLC, which has stopped leasing, 27.5% at General Motors Corp. and 16.3% at Ford Motor Co.

The biggest Japanese automaker, Toyota Motor Corp., is expected to post a 7.2% decline. At half the overall market's expected decline, that would continue Toyota's U.S. trend this year: losing sales but gaining market share.

Meanwhile, Edmunds.com predicted that Honda Motor Co. would post a small 0.9% improvement, with Nissan Motor Corp. posting a larger 2.3% gain.

Brian Johnson, an automotive analyst with Lehman Brothers, forecasted the industry would deliver a low seasonally adjusted annual selling rate, or SAAR, of 13.1 million vehicles.

The SAAR indicates what sales would total for the whole year if demand remained constant over 12 months, adjusting for seasonal factors. It's an easy reference to compare how the market is performing month to month.

For the past decade or so, the SAAR usually has ranged between 14 million and 17 million vehicles. Since December 2007, the monthly SAAR has been in decline. However, a SAAR of 13.1 would represent an increase from July's 12.6-million SAAR.

Despite that, Johnson said the declines in August are especially noteworthy because of the "very generous incentive programs" launched by some automakers during the month.

Even GM, which relaunched its once-popular Employee Discount for Everyone Promotion, will find it didn't provide the bang it once did, Toprak said.

"Overall, the program has not been nearly as effective as its first implementation back in 2005," Toprak said.

Despite the dismal sales report ahead, there are some signs the economy might be heading toward some stability.

Consumer confidence bumped up in August to 56.9, from 51.9 in July, the Conference Board reported earlier this week.

The Commerce Department also reported this week that orders for durable goods -- a category that includes vehicles, appliances and machinery -- topped analyst predictions in July.

That is a good sign, since durable goods purchases reflect general consumer confidence as well as business spending and outlook for the future.

Some dealers told the Free Press they are more optimistic than the nation's gloomy mood might suggest.

Terry Kidd, owner of Kidd Ford-Lincoln-Mercury in Morrison, Tenn., said he's even had some consumers, who had traded out of SUVs into small cars, bringing their cars back in for larger vehicles.

That's especially true, he noted, since the big discounts on the SUVs are helping them make more financial sense and gas prices have started to ease a bit, to less than $3.50 a gallon in his area.

Kidd said consumers brought back the small cars for a simple reason: "They didn't like them."

Contact SARAH A. WEBSTER at 313-222-5394 or swebster@freepress.com.

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Copyright (c) 2008, Detroit Free Press

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