October 1, 2013

U.S. auto industry looks for rebound after a rare September slump

The U.S. auto industry sees a 27-month streak of gains end, but most expect sales to recover in this quarter.

The Associated Press

DETROIT — Automakers expect little impact from the federal government shutdown, and they predict a fourth-quarter rebound after a rare sales decline in September.

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Sales for the U.S. auto industry were mostly down in September, including double-digit declines for GM and Volkswagen. The government shutdown doesn’t concern most analysts, but a lengthy impasse could affect credit availability.

The Associated Press

Auto sales dropped 4 percent from a year ago to just over 1.1 million, mainly due to a calendar quirk that pulled Labor Day weekend transactions into August’s numbers. The drop ended a 27-month streak of gains for the industry.

General Motors, Honda and Volkswagen reported double-digit declines for last month. Toyota, Nissan and Hyundai posted smaller decreases. Only Ford and Chrysler had gains among the bigger automakers.

GM’s 11 percent drop was its first since July of last year. It allowed Ford to get within 2,049 vehicles of unseating GM as the top U.S. automaker for the first time since May of 2011.

Most industry officials viewed September as an anomaly. They also downplayed the impact of the government shutdown, assuming it’s a short one.

Kurt McNeil, GM’s U.S. sales chief, said the fundamentals are still in place for GM and the industry to rebound in the coming months. Jobless claims are falling, home prices continue to recover, gas prices are down, household wealth is rising and the Federal Reserve has postponed the end of a bond-buying program that kept interest rates low, he said.

“As long as the underlying economic factors are supporting the business, which we believe they will through the end of this year and into 2014, we’ll get through this turbulence,” said Ken Czubay, Ford’s U.S. sales manager.

Jim Lentz, Toyota’s North American CEO, said that people have grown used to dysfunction in Washington.

Earlier this year, when the government failed to avoid automatic spending cuts known as sequestration, there were predictions that the economy would melt down, Lentz said.

“Basically they were told that when you wake up tomorrow, the Earth is going to stop spinning,” Lentz said. “For the most part the Earth didn’t stop. And I think that’s how they view this again.”

The shutdown will only affect sales if it causes credit markets to tighten, Lentz said. That will be a problem, he said, because low interest rates and abundant credit have helped fuel the auto sales recovery.

There was concern among executives and analysts that a long shutdown – and a looming confrontation over raising the government’s debt ceiling – could eventually cause sales to fall. McNeil said anything over two weeks could cut into consumer confidence.

“Consumers don’t like to make big-ticket item purchases when there’s a lot of uncertainty in the economy,” said Jesse Toprak, senior analyst for the TrueCar.com auto pricing site.

One reason GM’s sales fell last month was a reversal in pickup trucks, which have been hot-sellers. Sales of GM’s full-sized pickups, the Chevrolet Silverado and GMC Sierra, fell 8 percent even though the company is selling redesigned trucks.

Some versions of the trucks were slow to reach showrooms. At the same time, Ford’s F-Series pickup, the top-selling vehicle in the nation, posted nearly a 10 percent increase, and sales of Chrysler’s Ram truck rose 8 percent.

Ford and Chrysler offered more than $4,000 in discounts as they sold down 2013 models, according to the Edmunds.com auto site. But GM reduced its incentive spending almost 30 percent compared with last year to about $3,900.

While touting its incentive discipline in September, GM announced increased discounts starting Tuesday, including $1,000 cash on a 2014 Silverado and up to $4,500 on a 2013 model.

Pickup trucks are traditionally the top-selling vehicles in the U.S., and they’re key to automakers’ profits. Companies make around $10,000 per truck.

McNeil said GM’s sales should return to normal levels for the rest of the year. Through September, the company’s sales are up almost 8 percent from a year ago.

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