Archive for Wednesday, July 2, 2008

June sales fall for automakers

July 2, 2008


— Soaring gas prices and crashing consumer confidence led to one of the worst Junes in years for automakers, as even once-bulletproof Toyota watched sales drop more than 20 percent for the month, according to figures released Tuesday by the industry.

Toyota's surprising falloff - some believed that the company was poised this month to overtake General Motors as the top automaker - strongly suggests that the auto industry's problems are spreading beyond Detroit's troubled Big Three, each of which is restructuring to reduce the crippling costs of worker pensions and health benefits.

U.S. auto sales had been declining for seven months, but June's crash illustrates just how fast consumers are fleeing new-car lots in the face of $4-and-rising gasoline. One year ago, one gallon of regular was just under $3 per gallon, AAA reported.

"This is a market-wide problem," said Bob Schnorbus, chief economist with J.D. Power and Associates. "It has been hitting the Big Three much harder, but at some point ... it's going to start hurting everybody out there."

Toyota, for instance, has had trouble procuring enough batteries to ramp up production of its popular line of Prius hybrids, Schnorbus said. As a result, sales of the vehicle were down 25 percent from June of last year, despite heightened demand. The company also is straining under the weight of its sagging sport-utility-vehicle and truck lines, in which sales dropped by about one-third from last June.

Overall, Toyota's sales dropped 21.4 percent last month.

In Detroit, automakers have long depended on truck and SUV sales for their high profitability. Though demand for smaller, more fuel-efficient vehicles is climbing sharply, those cars' profit margins are much lower.

In June, Ford watched sales of its F-Series pickup truck - the company's backbone for decades - drop 41 percent. Sales of Ford's full-size Explorer SUV fell 52 percent.

Of the large American automakers, Chrysler had the roughest June, with a 35.9 percent sales plunge. Ford followed at 27.9 percent, while GM dropped a comparatively gentle 18.5 percent to maintain its sliver-thin sales lead over Toyota.

Automakers had three fewer sales days in June this year than last year, they noted on analyst calls Tuesday. Adjusting for the shortened sales month, GM said sales were down 8 percent; Toyota's, down 11.5 percent.

Shares of Toyota closed down 34 cents at $93.66 Tuesday. GM rose 25 cents, to $11.75. Shares of Ford closed down 10 cents, to $4.71. Chrysler became a privately held company after Cerberus Capital Management acquired an 80 percent stake from DaimlerChrysler last year.

Consumer pessimism was a major culprit in the June sales slump, said George Magliano, director of automotive research for Global Insight.

"It is the economy, it is gas, it is oil prices soaring, it is consumer confidence falling to levels from the 1980s," he said. Lagging consumer confidence hits manufacturers of big-ticket items, such as automakers, harder than other sectors, he said.

"Any way you slice it, April and May were bad," Magliano said, "June is worse."


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