Log In | Register
DETROIT — At Colonial Auto Center in Charlottesville, Va., President Kip Rowe says sales in February were about even with the same month last year.
What saved him from a decline, he says, is that foreign brands made up for large drops in sales of Ford Motor Co. and General Motors Corp. cars and trucks.
Industry analysts say Rowe, whose dealerships sell Mitsubishi and Nissan along with Lincoln, Mercury, GMC, Buick, Pontiac and Cadillac, probably will do better than dealers nationwide. Many analysts predict a down U.S. market when compared with February of last year, with the Detroit Three taking the biggest hit, when automakers release their monthly sales results on Monday.
"The difficult environment for auto sales continues to take a much heavier toll on the Big Three," Lehman Brothers analyst Brian Johnson wrote in a note to investors.
Like many analysts, Johnson expects GM, Ford and Chrysler LLC sales to be off by a double-digit percentages in February, with the overall U.S. auto market dropping to an annual sales rate of about 15.4 million vehicles for the month. That's more than 7 percent below last February's 16.6 million annual sales rate.
The reasons for the decline are the same as in past months: Plunging consumer confidence in the face of a possible recession, shrinking home values and high gasoline prices.
And Johnson wrote that it may become worse in the coming months due to another factor: tightening credit.
"In our view, even modestly rising delinquencies in auto lending (as well as broader consumer credit) will lead to tightened credit standards that will freeze out some buyers," he wrote.
Jeff Schuster, executive director of global forecasting for J.D. Power and Associates, said data collected from dealers during the month showed that sales deteriorated.
"Things were getting worse as the month progressed rather than better, which is typically what happens," he said.
He said the U.S. market could see an overall double-digit percentage decline in February, but automakers could bring it to single digits by increasing sales to rental car companies and other fleet buyers.
Recession talk, he said, is influencing consumers who are wary of spending on big-ticket items.
"It's a bit of a self-fulfilling prophecy," Schuster said. "If you start to feel you're in a recession and manufacturers and businesses plan for a recession, you get a recession. That could be enough to push the market into that," he said.
In Charlottesville, Rowe said his pickup truck business also is down.
The Detroit Three rely more on pickup and larger vehicle sales for their profits than the Asian automakers do.
"With gas being as high as it is and trucks not selling, that's where the biggest drop-off is at," Rowe said.
The decline is coming despite large incentives on trucks, he added.
"People just are not looking at them," Rowe said.
But even with the domestics' decline, Rowe is optimistic that the market will turn around later in the year.
Three years ago, sales were high due to automaker employee pricing offers to everyone, he said. Those who bought then should be ready to buy again, he said.
"Americans are going to trade cars every three years," he said. "That's going to happen. I don't know if they'll by a GM or Ford, but they'll probably buy another something."
Also, automakers are hoping that interest rate cuts and a federal economic stimulus package will kick in and boost the market in the second half of the year.
"I don't think it's going to be quite as bleak as everybody says this year," Rowe said.
