Auto sales plunge
Despite a slide in gas prices, sales fall 15.5% from a year ago for the worst August in 10 years, led by lower demand for pickups and SUVs.
NEW YORK (CNNMoney.com) -- Falling gasoline prices were not enough to revive sales of SUVs and pickups in August as major automakers all reported a sharp fall in sales once again. And Ford Motor warned it sees even tougher times ahead.
Sales tracker Autodata said industrywide sales fell 15.5% from a year ago, a bit worse than forecasts of a 14.4% decline from Edmunds.com. Sales were up 10% from July but sales are typically higher in August as automakers offer deals to clear out the previous year's models ahead of the introduction of new models in the fall.
This was the weakest August for industrywide U.S. sales in 10 years and it could force automakers to offer even more attractive inducements to move the light trucks Americans are now shunning.
General Motors (GM, Fortune 500), the nation's largest automaker, reported that sales tumbled 20% from year-ago levels. That wasn't as bad as expected though -- sales tracker Edmunds.com was forecasting a 28% drop.
In fact, August turned out to be GM's best month this year. The company sold 307,285 vehicles thanks to a popular "employee pricing" incentive program which allowed any buyer to get a vehicle for the same cost as a GM employee. That offer, in place for the last third of the month, has been extended into September.
But there was plenty of weakness in the report as sales of light trucks, which includes pickups, SUVs and vans, tumbled 24% from a year ago.
Nonetheless, GM said it is starting to see some signs of improving demand for SUVs and other large vehicles.
"With the recent moderation in fuel prices, we're seeing some relaxation of pent-up demand in pickups and utilities," said Mark LeNeve, the GM vice president in charge of sales and marketing in North America.
"We expect the second half of 2008 will be more challenging than the first half, as weak economic conditions and the consumer credit crunch continues," said Jim Farley, group vice president of marketing and communications, in the sales report.
Auto sales experts said that about the only good news for the automakers is that there are signs that the rate of decline seems to be slowing, suggesting that the market may be finally finding a bottom after nearly a full year of declining sales.
"There's no question there's been some signs of stability," said Tom Libby, senior director of industry analysis for J.D. Power & Associates. "Whether it's artificial because of incentives, we can't tell."
Jesse Toprak, executive director of industry analysis for Edmunds.com, said that lower gas prices in August certainly didn't hurt light truck sales, but he thinks it only helped at the margins.
"There is a little pent-up demand for SUV and trucks, but the gas prices didn't bring a dramatic change," he said. "For a real recovery, you're going to need gas prices below $3 and stay there for at least six months."
Sales of light trucks, which includes pickups and SUVs, came in at 49.7% of all overall auto sales. While that is up from the 45% share in July, it is down from the 52.7% share of a year ago. Light trucks held a majority of the U.S. market from August 2001 until March of this year.
Gasoline prices declined throughout August, falling about 10% from the record $4.114 set on July 17. But continued job losses and home price declines, coupled with low consumer confidence, kept many potential car and light truck buyers on the sidelines.
And Toprak said he believes that the problems dogging the auto sales go far beyond gas prices to the broader economy.
"The credit issues are a lot more serious than gas prices," he said. "A lot of consumers are willing to buy a car despite gas prices but they can't get a car loan."
Ford reported U.S. auto sales fell 27% in the month compared to a year earlier -- far worse than the forecast of a 16% drop from Edmunds.
Toyota's sales fell 9% in August. Edmunds was predicting a 7% drop.
Both companies saw a steep decline in sales for their larger models. Sales of Ford's pickups and vans tumbled 39% while sales of SUVs plunged 53%.
Toyota, the No. 2 automaker in terms of U.S. sales, saw sales of SUV models tumble 17% and pickup sales fell 12%
Plunging sales of light trucks are a huge problem for all three companies. Light trucks account for about 40% of Toyota's sales, 60% of GM's sales and roughly two-thirds of Ford's sales.
But even sales of cars, which are typically more fuel efficient than light trucks, fell for the three largest auto companies. GM's car sales fell 14%. Ford reported a 9% decline in car sales in August while Toyota's car sales slipped 4% from a year earlier.
Limited supplies of some of Toyota's fuel efficient models hurt the company. Sales of the Prius, the most popular gas-electric hybrid model of any automaker, fell 4%.
Honda Motor (HMC), which had been forecast to report a 1% gain in sales, instead reported that sales fell 7% in the month. Sales of its car models declined 5% and light truck sales tumbled 10%.
While Honda was able to get enough hybrids to dealers to post a 30% jump in sales in that segment, sales of hybrids only accounted for about 2% of its overall sales. Still, Honda said hybrids were an important part of the company's strategy.
"Meeting the demand for fuel-efficient vehicles remains a priority," said Dick Colliver, executive vice president of sales for American Honda.
The biggest drop in sales came at Chrysler LLC, the privately-held automaker that includes the Chrysler, Dodge and Jeep brands. Its sales plunged 34%, with virtually every model the company offers posting double-digit percentage declines from a year ago. The results, as bad as they were, matched Edmunds' forecast.
Light truck sales at Chrysler tumbled 33%, while car models plunged 39%. Only the Town & Country minivan was a bright spot for the battered automaker, with sales increasing 15% from a year ago.
Ford, which has reported a year-to-date sales decline of 16%, trimmed both its outlook and its production plans for the rest of the year.
Ford said its forecast for full-year industrywide sales in the U.S. to the low end of its previously announced range of 14 million to 14.5 million.
And in response to the weak sales and outlook, Ford said it would cut second-half production plans by about 5%, trimming 20,000 vehicles in the third quarter and 30,000 vehicles in the fourth quarter
Nissan Motor bucked the trend, reporting that is August sales rose 13.6% -- much higher than Edmunds' forecast of a 2.3% gain. Sales of Nissan's cars fell about 1% from a year ago but light truck sales jumped 35%.
But even in that segment, buyers were moving to smaller more fuel-efficient vehicles. Most of the sales gains were attributed to the rollout of the Nissan Rogue, a so-called crossover vehicle which is a small SUV with a more car-like ride, the Xterra, a small SUV, and the Frontier midsize pickup.