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Auto Sales Are Stuck In Slow Lane

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By DEE-ANN DURBIN, The Associated Press

Published: December 1, 2007

DETROIT - Nervous consumers are expected to make November another sluggish month for auto sales despite holiday discounts and a handful of runaway hits such as the new Chevrolet Malibu.
Consumer confidence has fallen for four consecutive months and November's reading, recently reported by the Conference Board, was at its lowest level since 2005, when gas prices soared after Hurricane Katrina.

That could spell trouble for the auto industry, since consumer confidence is one of the best predictors of demand for cars, says Bear Stearns analyst Peter Nesvold. High gas prices and the slump in the housing market are among consumers' chief worries.

"We anticipate a continued slowing in auto sales as one symptom of a hand-wringing consumer," Nesvold said in a recent note to investors.
Automakers are scheduled to report their monthly sales results Monday. Nesvold and other analysts predict sales will be flat or down slightly compared with last November.

The month typically is a tough one for automakers despite year-end clearance discounts, which rolled out throughout November at most automakers. Goldman Sachs auto analyst Robert Barry said in a note to investors that November would have been worse without the increased incentives.

GM had a bright spot with the Malibu sedan, which hit dealerships at the beginning of the month. The automaker won't give exact sales numbers until Monday, but spokesman Terry Rhadigan says there is only a seven-day supply of Malibus nationwide. GM, which has been making the Malibu in Fairfax, Kan., said Wednesday it will start producing the sedan at a second plant near Detroit to keep up with demand.

Jesse Toprak, chief economist for the auto information site Edmunds.com, says GM should have had more Malibus on dealer lots to take advantage of the buzz. Dealers typically want a 30-day supply of a new vehicle for at least six months, he said.

GM dealers are thrilled by the reaction to the Malibu, which takes aim at the perennially popular Honda Accord and Toyota Camry sedans. Duane Paddock, the owner of Paddock Chevrolet in Kenmore, N.Y., says he has sold 27 of the 30 Malibus on his lot, and 12 more are being shipped. Paddock says buyers are drawn by the styling.

"It's just been overwhelming, the response that we've gotten," Paddock said. "This car stands up on its own."

Toprak predicts GM's sales will be flat compared with last November, with the Malibu making up for some slower sellers such as the Chevrolet Impala. He also predicts flat sales for Ford Motor Co., which would be a relief for the automaker after a string of tough months and double-digit losses as it slashed low-profit sales to rental fleets.

Toyota Motor Corp. also should see little or no increase in November, a stark contrast to the double-digit monthly sales increases it was enjoying until recently. Toprak says Toyota's gains weren't sustainable in the long term, and the company was expected to grow at a slower pace this year.

Several analysts predict Chrysler LLC will see the biggest year-over-year sales declines in November as it struggles to revamp its vehicle lineup and to rely less heavily on sales to rental fleets, which have been propping up its numbers in recent years. Chrysler announced at the beginning of November that it will cut four products in 2008, including the slow-selling Dodge Magnum wagon and the Chrysler Pacifica crossover, as part of a restructuring that also will eliminate up to 12,000 jobs.

Lehman Bros. auto analyst Brian Johnson, who forecast a 17 percent decline for Chrysler in November, said in a note to investors that weak truck sales also are hurting the automaker. Johnson says Chrysler's heavy incentive spending is having less effect as competition in the truck segment heats up.

Honda and Nissan Motor Co. could be the big winners in November. Both have newly redesigned sedans, the Honda Accord and Nissan Altima, that have been boosting sales this fall. Toprak predicts Honda's sales will be up 8 percent and Nissan's will be up 10 percent over weak sales last November.

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