"We're seeing that the consumer confidence is pretty
fragile right now because of everything that's happened in the past few
months," General Motors Co.'s US sales chief, Don Johnson, told reporters
on a conference call.
GM's U.S. sales in July rose about 8 percent, while those at
Ford Motor Co. and Fiat-controlled Chrysler increased 9 percent and 20 percent,
respectively.
High unemployment and concern about the strength of the US
recovery could force automakers to offer consumers more generous incentives
that sap profits, analysts said.
Monthly car sales figures are among the first snapshots of
consumer demand each month. Consumer spending habits are of particular interest
after last week's tepid increase in U.S. second-quarter output and sharp
downward revision for the first quarter.
The auto industry also is coming off May and June sales that
fell short of economists' predictions, raising concerns about the recovery.
Analysts said higher pricing by many automakers backfired at a time of
penny-pinching consumers.
Shares of GM and Ford were down by 3 percent on Tuesday
afternoon.
Thirty-nine economists polled by Reuters were expecting an
annual sales rate in July of 11.8 million vehicles.
That pace would still trail the 13 million-plus rate from
earlier this year, but many industry executives said it would mark the
beginning of a recovery from a bottom in June, when the rate was 11.45 million.
The numbers are a far cry from the almost 17 million
averaged from 2000 to 2007, before the deepest US economic downturn since the
Great Depression and the bankruptcies of GM and Chrysler in 2009.
Chrysler's US sales chief, Reid Bigland, called the market
"tougher than a cheap steak."
At the start of the year, analysts had forecast a bounce
back in 2011 sales to between 13 million and 15 million vehicles, but the March
earthquake in Japan that led to production cuts and the weak economy changed
that picture.
On Tuesday, GM and Ford reiterated their outlooks for the
low end of the 13 million to 13.5 million range, including about 300,000 in
medium and heavy truck sales. However, GM's Johnson said "a real cloudy
economic outlook" had hurt consumer sentiment.
"It will continue to recover although more gradually
than we had anticipated in the second half," he said.
Consumer nervousness was reflected in the Commerce
Department's announcement on Tuesday that US consumer spending unexpectedly
fell in June to post the first decline in two years.
The US housing market's strength is critical for the more
profitable full-size pickup truck sales, but Ford US sales analyst George Pipas
said a recovery is more a matter of if than when.
"Last I heard, the housing market was still on wounded
knee," he said.
Industry research firm Edmunds.com said to appeal to those
consumers, automakers may boost incentive spending. In July, automakers raised
such spending by about 8 percent over June.
Japanese brands already increased incentive spending about
25 percent to $1,990 per vehicle from June to July, compared with a 4.5 percent
rise to $2,919 per vehicle by the US automakers, according to Edmunds.
While the US level is 47 percent higher than the Japanese
rate, the difference is far below a year ago when it was a 69 percent gap,
suggesting Johnson and his US peers may resort to priming the incentive pump,
Edmunds said.
"I'm sure Ford and the domestic folks will have to
follow," said Gary Bradshaw, a portfolio manager with Hodges Capital
Management, which owns Ford shares.
GM on Tuesday posted an 8 percent sales gain to almost
215,000 vehicles on stronger demand for compact vehicles including the
Chevrolet Cruze car and Equinox crossover.
GM said July sales of cars and crossovers rose 8 percent and
20 percent, respectively, showing a continuing tilt toward vehicles with
smaller profit margins than full-size pickup trucks, which fell 3 percent.
GM, which was previously criticized for its bloated
inventory of big pickups which stood at 122 days at the end of June, now
expects to end the year at 90 days. That is down from the 100 to 110 days it
previously forecast and closer to the 80 days typically preferred by the
industry.
Johnson said GM's goal is not to resort to discounting to
drive truck sales.
Ford sales rose 9 percent due to stronger demand for its
Fusion and Fiesta cars, as well as the small Escape sport utility vehicle.
Both GM and Ford said supply of smaller cars and crossover
vehicles was constrained by an inability to make enough.
"The consumer is telling us that they need two more
than we can make," Ford's US sales chief Ken Czubay.
Chrysler sales jumped 20 percent, while those at Nissan
Motor Co. and Hyundai Motor Co. rose 3 percent and 10 percent, respectively.
Sales at Toyota Motor Corp and Honda Motor Co., still recovering from the
aftermath of the earthquake, fell 23 percent and 28 percent, respectively.
GM shares were down 2.9 percent at $27.26 and Ford shares
were down 2.8 percent at $12.00 on Tuesday afternoon.
