Auto sales slumping in U.S. as top firms miss estimates
Cuts to production likely for carmakers addressing large inventory on dealer lots
SOUTHFIELD, MICH.— The largest automakers in the U.S. sparked concerns that years of high-flying demand are over.
The industry will start the year with a fourth consecutive monthly drop, with Ford Motor Co. and Honda Motor Co. reporting the steepest decreases in April. The six biggest automakers missed analysts’ estimates.
Another month of weak sales raises the prospect carmakers will need to boost discounts and cut production to address swelling supply on dealer lots — particularly as credit tightens. Manufacturers Ford and General Motors Co. joined auto-parts and dealer stocks leading some of the S&P 500 Index’s biggest declines in Tuesday trading.
“It was a low-interest party, but lenders have pulled back,” Maryann Keller, an auto industry consultant in Stamford, Conn., said by phone.
“They have made it more expensive for the borrower to get credit. Some people can’t get financed and for others it’s too expensive.”
Fiat Chrysler Automobiles NV’s New York-traded shares dropped 5 per cent as of 11:30 a.m., while Ford fell 4 per cent and GM slid 3.2 per cent. BorgWarner Inc. and Delphi Automotive Plc led auto-supplier shares lower, while retailers including AutoNation Inc. and CarMax Inc. also slumped.
The industry likely fell short of analysts’ projected annualized pace of U.S. auto sales, adjusted for seasonal trends, of about 17.1 million, slower than 17.4 million a year earlier.
The U.S. market is plateauing, Mark LaNeve, Ford’s vice president of U.S. marketing, sales and service, said on a call with analysts and reporters.
“I’m not discouraged by the number,” he said. “In this kind of industry, there’s going to be these kinds of months.”
Industrywide deliveries have declined in each of the first three months this year and were down 1.5 per cent through March, according to researcher Autodata Corp. The market’s slump continuing into April reinforces estimates for the U.S. auto market’s first annual contraction since 2009, the year GM and Chrysler reorganized in bankruptcy court.
GM has scheduled about 13 weeks of downtime at North American plants during the third quarter, chief financial officer Chuck Stevens told analysts last week. While the bulk of the idled production is related to retooling factories to make new or redesigned sport utility vehicles and pickups, the automaker is also trimming output of the Corvette sports car at its plant in Kentucky.
Sales are declining even as automakers have ratcheted up discounts. Spending on incentives last month through April16, reached a record for the month of $3,499, according to J.D. Power.
“Sales look soft,” David Whiston, an auto analyst at Morningstar Inc., said by phone. “I told clients that 2016 would be the end of growth, and it looks like just that.”