Auto sales: bleak, but is it the bottom?
U.S. auto sales in June are expected to post a double-digit decline, dropping to a 15-year low as record gas prices killed the market for trucks and SUVs and made it impossible for many drivers to swap out for more fuel-efficient, new cars.
Major automakers, including Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) and General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), and leading dealerships have warned that June sales plummeted and shoppers grew suddenly scarce.
Now the urgent question for investors has become whether the world’s largest car market has hit bottom or whether an even deeper downturn awaits over the remainder of the year due to $4 per gallon gasoline and tighter credit.
Evidence of a prolonged slump would also add to concerns that Detroit’s automakers, saddled with truck-heavy lineups and mounting losses, may not have enough cash to ride out the current tailspin.
“My expectation is that the second half of this year isn’t going to be much better, if at all, than the first half,” Jerry York, a veteran auto industry executive and adviser to billionaire investor Kirk Kerkorian, told Reuters this week.
GM, Ford and Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) have responded to a plunge in truck sales by cutting production and adding sale incentives online payday advance. But Wachovia Capital Markets forecast that despite the moves, inventory of light trucks still rose in June.
Analysts expect June sales to drop more than 10 percent after adjusting for the number of selling days.
Forecasts for the annualized sales rate in June range from 12.5 million units to 13.7 million units, compared with 14.3 million in May. Even at the top end of expectations, sales would mark the worst result for the industry since 1993.
Filed under: technology by Wolf