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Auto Sales Rev Up By Small Margin

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The Associated Press

Published: August 30, 2008

NEW YORK - With gas prices still near record highs, the economy in a slump and continued trouble in the credit markets, just about everybody expects August vehicle sales to be down significantly from a year ago.

Analysts, however, say August's numbers probably won't be as bad as July's record lows, mainly because of General Motors' late-month employee pricing offer.

Jeff Schuster, executive director of global forecasting for J.D. Power and Associates, said he expects August's seasonally adjusted annual sales rate to be a little better than 13 million units when automakers release their monthly sales data Wednesday. That compares with 16.2 million in August 2007.

The rate, known as SAAR, indicates what sales would be for the full year if they remained at the month's pace all year, with adjustments for seasonal fluctuations.

"Sales could be even closer to 13 million if it weren't for the GM anniversary sale, which could provide a lift," Schuster said. "But sales will still be substantially below a year ago."

GM said earlier this month that it would extend employee discounts to everyone on almost all of its 2008 and some of its 2009 models. Employee discounts generally are 10 percent below the invoice price but vary by model.

Although the promotion, which runs through Tuesday, is expected to boost the Detroit automaker's sales numbers, analysts have said that these kinds of moves tend to take away from sales in future months and cut deeply into profits.

U.S. sales hit a 16-year low in July, falling to a SAAR of 12.5 million vehicles. Most of the major automakers posted double-digit sales declines, with Nissan the only one to report an increase.

Automakers have seen their sales tumble as weak consumer confidence and high gas prices have steered many buyers away from dealer lots and pushed the ones who remain toward smaller, more fuel-efficient vehicles.

At the same time, the tightening of credit markets and higher leasing costs have made it harder for many Americans to obtain the kinds of automotive financing they desire.

The U.S. automakers have been the most hurt by the drop in demand, as a result of their product focus on trucks and SUVs, and they have had to scramble to shift capacity to meet the new demand for more-efficient cars.

George Pipas, Ford's top sales analyst, said the negative factors that combined to result in July's sales drop haven't gone away, and he doesn't expect them to for the next year to 18 months.

"It's not a very pretty picture for anybody right now," Pipas said.

Another bright spot in August's figures could be the decline in gas prices during the month.

After steep increases in June and July that sent the national average price at the pump as high as $4.11, prices retreated in August, hitting $3.66 Thursday, according to auto club AAA, the Oil Price Information Service and Wright Express.

But average gas prices still remain 32 percent higher than a year ago, the group said.

Jesse Toprak, executive director of industry analysis for the automotive information site Edmunds.com, said the steady drop in gas prices along with hefty incentive offers should keep August's sales from falling to July's lows.

Toprak said that while July's record high gas prices may have permanently driven some consumers away from trucks and SUVs, the recent drop in prices may be enough to lure others back to dealers.

"What that means is, automakers have to be flexible enough to respond to swings in demand in the most effective manner," Toprak said.

Bob Carter, general manager of Toyota's U.S. division, said earlier this month that it looked like some truck and SUV shoppers were returning.

"August seems like it's coming along pretty good, but it's versus where the market was in May and June, not comparable to where it was a year ago," Carter said.

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