Auto sales remain soft in July

DETROIT (Reuters) - U.S. auto sales remained soft in July and all three Detroit automakers reported sales for the month that fell slightly short of analyst estimates, as high U.S. unemployment and weak consumer confidence kept would-be buyers on the sidelines.

JP Morgan said the annual sales pace for July was on track to be around 14 million vehicles. That falls in line with analysts' average forecast and is also in line with June's 14.1 million rate.

General Motors Co, the largest U.S. automaker, reported on Wednesday a 6 percent drop in July U.S. sales, while Ford Motor Co posted a 4 percent drop. The smallest U.S. automaker, Chrysler Group LLC, posted a 13 percent increase. Toyota Motor Corp's U.S. sales were up 26 percent to 164,898 in July.

GM and Ford both pinned their declines on lower sales to fleet customers like rental car companies. GM's fleet sales fell 41 percent, in line with the company's forecast last month.

But their results were still lower than some estimates. Analysts had expected better financing deals, pent-up demand and increased construction spending to offset the sluggish U.S. economy.

"It's the economy. There is no way around it," said George Magliano, senior economist with IHS Automotive. "In this kind of environment, it's very difficult for light vehicle sales to get any traction."

During the first half of the year, the U.S. auto industry reported an average annualized auto sales pace of 14.3 million. After a strong first quarter, sales growth began to slow in the spring, but remained steady.

GM forecast an annual auto sales pace for July between 13.9 million and 14.1 million vehicles. Ford projected a sales rate of 14 million, including medium- and heavy-trucks, which typically adds 300,000 sales.

Lack of job growth and confusion about government policy on tax cuts and spending tempered sales in July, Magliano said. But Ford and GM executives also said the latest U.S. economic news was encouraging and could boost sales.

Car companies are anticipating a second-half sales increase spurred partly by the introduction of a slate of new models.

"We think some truck buyers have been reacting to the mixed economic signals of the last few months," said Kurt McNeil, head of GM's U.S. sales operations. "But recent reports of consumer confidence, home prices, and personal income were better than expected.

He added: "We expect all of these factors will help release more pent-up demand and drive truck share of industry higher in the coming months, which is the normal trend."

GM shares were up 1.3 percent at $19.97 on Wednesday afternoon, and Ford shares were down 0.4 percent at $9.15.

U.S. MARKET TO OFFSET EUROPE

Major automakers are increasingly counting on the U.S. auto market to offset weak sales in Europe. Last week, Ford reported a more than $1 billion loss in Europe due to the deepening economic crisis in the region.

On Thursday, GM is expected to report second-quarter results. Its troubled Opel brand in Europe is considered one of the biggest risks to the company's health, analysts have said.

During a call with analysts and reporters, GM executives said they did not expect a change in marketing strategy after its top marketing executive, Joel Ewanick, was abruptly ousted earlier this week.

GM sold 201,237 cars and trucks last month. Ford, the No. 2 U.S. automaker, sold 173,966 cars and trucks. Chrysler, majority-owned by Italian automaker Fiat SpA, sold 126,089 cars and trucks.

Auto research firm Edmunds had expected GM to report 214,315 vehicle sales and Ford at least 175,791. Chrysler beat Edmunds' forecast for its sales but fell short of the Barclays Capital estimate of 129,453 vehicles and the RBC Capital Markets projection of 127,889.

Both Ford and GM attributed their sales declines to a drop in sales to fleet customers, such as rental car companies. GM's fleet sales fell 41 percent, in line with the company's earlier outlook, while Ford fleet sales dropped 16 percent. Fleet sales are less profitable than retail sales to consumers.

U.S. auto sales for Japan's Nissan Motor Co rose 16.2 percent in July to 98,341. German automaker Volkswagen AG reported sales of 37,014, up 27.3 percent from a year ago.

(Reporting by Deepa Seetharaman, Bernie Woodall and Paul Lienert; Editing by Lisa Von Ahn, John Wallace and Matthew Lewis)

Source: http://news.yahoo.com/chrysler-reports-13-percent-jump-july-auto-sales-124818600--business.html

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