Tuesday, October 4, 2005

SUV sales tank in Sept.

Double-digit losses sock Ford, GM as truck demand falls, employee discounts for all cool off.

By Brett Clanton and Bryce G. Hoffman / The Detroit News

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The ugly situation at General Motors Corp. and Ford Motor Co. is getting worse by the day.

After a brief summer uptick, stoked by employee-style discounts, the automakers' sales are plunging again as consumers shy away from gas thirsty SUVs and pickups.

The hit -- while widely expected -- comes at a bad time for GM and Ford, which are struggling to rebound from losses in North America and are counting on new vehicles to regain sales momentum.

In stark contrast to Chrysler and the top Japanese brands, GM and Ford posted September U.S. sales declines of 24 percent and 20 percent, respectively, as consumers lost interest in employee-pricing promotions and passed over big SUVs and trucks.

Light truck sales skidded an alarming 30 percent at GM and 28 percent at Ford last month.

Standard & Poor's Corp. piled on Monday with more bad news. S&P, which lowered the automaker's credit ratings to junk status just months ago, said it is poised to lower the ratings further by early next year. It cited growing concerns about the automakers' ability to recover financially in North America amid severe market pressures that are undercutting new vehicle prices, sales.

"We believe soaring gasoline prices after Hurricanes Katrina and Rita are leading to an accelerating decline in demand for SUVs," Standard & Poor's Corp. credit analyst Scott Sprinzen said in statement Monday.

The bad news should give GM's board a lot to discuss today at a meeting in Detroit.

The industry's 7.6 percent downturn in September was not enough to derail DaimlerChrysler AG's Chrysler Group, which posted a 4 percent sales increase last month.

Still, Chrysler executives sounded a cautious note Monday.

"The market's getting tough," Chrysler CEO Tom LaSorda said Monday. "A lot of economic issues are going on. The hurricanes didn't help."

Japanese automakers also saw gains, with Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. all reporting double-digit increases for the month.

Industry new car and truck demand cooled after blistering sales in July and August, when Detroit automakers offered employee-style vehicle discounts. The industry's annualized selling rate fell to 16.36 million last month, down sharply from 17.46 million a year ago.

GM and Ford sold a combined 554,000 cars and trucks in September, down 36 percent from 864,000 units in July.

September's performance raises questions about the lingering impact of recent hurricanes in the Gulf Coast, and about the size of the payback Detroit automakers will face from the employee-pricing programs, which ended last week.

While the programs helped to boost sales for all three companies after a weaker-than-expected start to the year, analysts say the promotions pulled ahead sales that otherwise might have come in the fall.

That could be a problem for U.S. automakers, who will find a challenging market in the months ahead with consumer confidence near a two-year low, interest rates climbing, high gas prices and spotty employment growth.

"We will probably get back to normal in the November timeframe," George Pipas, Ford's chief sales analyst, said in a conference call Monday.

Not only did Ford's SUV sales crater, but it also saw demand ebb for its industry-leading F-Series pickups

Ford dealer Ken Butman in Ypsilanti said the F-Series dropoff was at least partially due to high gas prices.

"A lot of people were driving trucks that didn't need them," he said. "It's a cycle."

GM, which reported a 24 percent sales decline, also saw its pickup and SUV sales drop in September. Though the automaker said sales of new vehicles such as the Hummer H3 and Chevrolet HHR wagon were healthy, it blamed the month's overall poor performance on unfavorable year-ago comparisons and low inventories following three months of employee-pricing promotions.

"It was not a great month, but it was somewhat above what we expected," said Paul Ballew, GM's chief sales analyst.

Chrysler turned in its 18th consecutive month of sales gains and wrapped up its eighth consecutive quarterly sales increase.

While truck sales faltered at GM and Ford, Chrysler posted its best month for its Dodge Ram pickup since 1999, and also saw continued improvements for Jeep Grand Cherokee and the Chrysler 300 sedan, even as sales of its industry-leading minivans slipped.

The results were surprising, considering the confusion that followed the two hurricanes in the Gulf Coast, said Gary Dilts, Chrysler's senior vice president of sales.

"The whole state of Texas was moving around during the last two weeks of the month, as was Louisiana and Mississippi," Dilts said. Yet Chrysler was not immune from the continued downturn in sales of large SUVs -- its full-size Durango sport utility fell nearly 11 percent for the month. Neither was Toyota, whose Sequoia SUV plummeted 46 percent. Nissan's big Armada SUV also declined by more than 10 percent.

"Gasoline prices are having a noticeable impact (on SUV sales)," said George Magliano, analyst at Global Insight in New York, though he thinks SUV sales still have a long way to fall before hitting rock-bottom.

Large, gas-guzzling SUVs such as the Chevy Tahoe and Ford Expedition still represent around 1 million in U.S. vehicle sales each year, but are becoming more costly to operate as gas prices hover around $3 per gallon. As U.S. consumers drift toward more fuel-efficient cars, Detroit's truck-heavy automakers have taken a hit, and Asian automakers have moved in for the kill.

In September, Toyota's U.S. sales were up 10 percent, while Honda gained 11.7 percent, Nissan shot up 16.4 percent and Mazda inched up 5.4 percent, said Autodata Corp.

South Korea's Hyundai Motor Co. also grew sales 9.1 percent, as did its sister company, Kia Motors.

The gains helped Asian automakers increase their share of the U.S. auto market to 38.2 percent in September, up from 32 percent a year ago. Domestic automakers grabbed 55 percent of the U.S. market last month, down from 61.6 percent at this point in 2004, according to Autodata.

Detroit automakers are not planning changes in their production schedules for the last three months of the year, a welcome departure for many in Detroit after GM slashed output 20 percent in the first three quarters of the year and Ford cut production by 9 percent.

Germany's Volkswagen AG and luxury carmaker Audi are expected to report September sales results today.

You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.