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Auto Buyers Steer Clear Of Gas Guzzlers

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Bloomberg News

Published: July 2, 2008

Ford Motor Co., Toyota Motor Corp. and Nissan Motor Co. said June sales plunged as gasoline prices above $4 a gallon drove consumers away from fuel-thirsty trucks.

Total vehicle sales at Ford dropped 28 percent. Nissan reported an 18 percent decline, and Toyota was down 21 percent. Honda Motor Co. and Volkswagen AG, which rely on cars for the bulk of their sales, each rose about 1 percent.

The automakers' initial sales releases support analysts' projections that said companies with the largest vehicles would tumble the most. Ford's F-Series large pickup, perennially the best-selling vehicle in the United States, was outsold for the second straight month by Toyota's Corolla and Camry cars and Honda's Civic and Accord.

The change in consumer behavior "sure looks like it's going to be lasting," Gerald Meyers, a professor at the University of Michigan and a former chief executive officer of American Motors Corp., said in a Bloomberg Television interview yesterday. "The auto companies are behaving like it's going to be permanent."

Among the more than 20 U.S. models Ford sells, only two posted gains in June: the Mercury Milan and Ford Fusion sedan. Sales of the Fusion gained 18 percent and the Milan 7.6 percent. Each of Ford's four sales divisions fell by at least 22 percent.

Ford's percentage decline is higher because the previous year's results included 5,570 sales from the Land Rover and Jaguar divisions, now owned by India's Tata Motors Ltd.

Sales of Ford's crossover SUVs such as the Lincoln MKX, a bright spot in previous months, fell 18 percent in June.

The seasonally adjusted annual rate, a measurement of sales without regard to seasonal fluctuations, probably fell to 13.2 million cars and light trucks last month, down 16 percent from 15.7 million a year earlier, based on a Bloomberg survey of 30 analysts and economists. That would be the lowest since March 1993.

GM's sales decreased 21 percent and Chrysler's 25 percent, according to a survey of five of the analysts. U.S. auto sales are on a pace to plunge to 14.5 million units for 2008, the lowest in 15 years, according to Deutsche Bank. The annual industry average this decade has been 16.8 million.

Last month had three fewer selling days than June 2007. That means Detroit's automakers may report figures roughly 12 percentage points lower than the analysts' adjusted estimates. By that measure, Ford's 28 percent decline was in line with the analysts' forecasts of a 19 percent drop.

A decrease would extend the industry's sales slump to eight straight months, the longest tumble in seven years. Average gasoline prices in June topped $4 a gallon for the first time and consumer confidence reached a 16-year low, prompting more Americans to postpone purchases of new vehicles.

Inventories of compact cars and gasoline-electric hybrids are "going down at a rate we've never really seen before, and automakers are caught a bit unprepared," Jesse Toprak, an Edmunds.com analyst in Santa Monica, Calif., said in an interview.

GM is boosting production of cars and smaller SUVs by almost 50,000 units this year in response to consumers' "close attention to fuel-efficiency," sales chief Mark LaNeve said in a June 23 conference call with reporters.

More than 40 percent of Americans who said they are spending less than they did six months ago pointed to the price of gas as the reason, according to a Bloomberg/Los Angeles Times survey.

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