Latest economic woe: auto slump

NEW YORK (CNNMoney.com) -- Most major automakers reported U.S. sales strongly up from a year ago, but weaker than both May's sales levels and industry forecasts.

The weaker-than-expected sales and the slower sales pace could be a sign that the weakening economic and jobs outlook is cutting into demand for cars.

Overall sales were up 14% from a year ago, according to sales tracker Autodata, but that left sales down 11% from a year ago. The seasonally-adjusted annual sales rate came in just under 11.1 million vehicles, the weakest reading since February.

Experts said rising worries about the economy are clearly cutting into dealer showroom traffic. A survey released Tuesday from the Conference Board found consumer confidence falling sharply and the percentage of Americans planning to buy a new car in the next six months falling to a record low of 1.2%, from 2.7% in May.

That's a concern heading into the summer, which is typically a big sales season for automakers.

"It's really a scary thing," said Jessica Caldwell, senior industry analyst at Edmunds.com. "The past week has been a barrage of bad economic news, and that's not helping. I think it's going to take a pick-up in the economy, more than new models or incentives to get sales going again."

The one thing going for most automakers are lower than normal inventories of new cars on dealer lots heading into the summer, despite the slowing sales. Jesse Toprak of TrueCar.com said automakers have all learned to limit production more than they did in the past. That will be bad news for consumers, though, since it means cash-back offers and other deals typical during the summer sales season will be tougher to find this year.

"When you have low demand and an abundance of supply, that generally triggers an incentive war. That's not what we're seeing this year," he said.

GM, the nation's leading automaker, reported sales up 11% from a year ago, as the four brands it continues to actively sell -- Chevrolet, Cadillac, Buick and GMC -- posted a 36% rise. There was a 98% drop in sales for Hummer, Saturn, Pontiac and Saab, the four brands GM shed as part of the bankruptcy process. Those brands now make up only 0.3% of its sales as GM disposes of its remaining inventory.

But GM sales slipped 12.5% from May. Forecasts had been for a decline of between 8% and 10% compared to May.

Steve Carlisle, GM's vice president of global product planning, said most of the decline from June was due to a 30% drop in fleet sales to businesses customers, such as rental car companies. The decline was planned due to the front-loading of those sales early in the year, he said. Retail sales to customers declined only slightly from May.

"It's not so far off expectations," Carlisle said. He added that GM is expecting retail sales to remain flat the rest of the summer.

George Pipas, Ford's director of sales analysis, said the industry has been seeing modest improvement each quarter from the fourth quarter of 2009 to the second quarter, which closed out in June. He's hopeful there will be further modest improvement in consumer demand going into the summer.

"I think modest is the operative word," he said.

Ford (F, Fortune 500) reported that sales at its Ford, Lincoln and Mercury brands were up 15% from a year ago, but down 13% from May. Forecasts had been for a 17% rise from a year ago.

Sales fell 29% from a year ago at its Volvo brand, which it is in the process of selling to Chinese automaker Geely.

Ford sales were enough to keep it ahead of Toyota Motor (TM) in competition for the nation's No. 2 sales position. Toyota sales were up only 7% from a year ago, but that left it down almost 14% from May sales levels. Forecasts had been for a drop of 12% to 13% from May.

Jim Lentz, president and chief operating officer of Toyota Motor Sales, U.S.A., said his company was pleased with its June sales results, but he acknowledged that "the entire automotive industry struggled in June as weakening consumer confidence weighed on sales."

Chrysler Group reported that its sales soared 35% from a year ago, but that was still down 12% from May levels. Chrysler, at least, was able to edge past forecasts, which had called for a year-over-year gain of 33%. Caldwell said Chrysler leaned heavily on fleet sales to support its sales total during the month. Chrysler does not break down the difference between fleet and consumer sales though.

Honda Motor reported only a 6% rise in sales compared to a year ago, which resulted in a 9% drop from May's sales total. But that was better than Japanese rival Nissan, where June sales were up 11% from a year ago, but down 23% from May. Both fell short of forecasts.

Hyundai Motor Group, which includes both the Hyundai and Kia brands, was able to buck trends by posting a modest 3% gain from its May sales levels, and a 28% increase from a year ago. That topped the forecast of a 13% gain from 2009 levels.