U.S. September Auto Sales May Have Grown 3.4%

October 1, 2002 BY ALAN OHNSMAN BLOOMBERG

U.S. auto sales may rise 3.4 percent in September as General Motors Corp. joined U.S.-based rivals in offering 60-month, no-interest loans on 2002 cars and light trucks to clear dealer lots for newer models.

Sales may fall 5.6 percent at General Motors, rise 4.4 percent at Ford Motor Co. and gain 14 percent at DaimlerChrysler AG's Chrysler unit, the average forecasts of seven analysts surveyed by Bloomberg News. General Motors had shortages of some models after gains of 24 percent and 18 percent in the previous two months, analysts said. Results will be reported tomorrow.

General Motors on Sept. 19 revived interest-free loans on all 2002 models, after ending those discounts earlier in the month. Ford and Chrysler had kept the financing on this year's vehicles to help dealers make room for newer models. All three automakers also offer shorter-term, no-interest loans on some 2003 vehicles.

"September isn't as hot as August was but it's still going to be a good month," said Phil Hartz, senior vice president of UnitedAuto Group Inc., the third-largest U.S. retailer of new and used vehicles. "We're delighted with the level of incentive support the manufacturers are giving."

Cars and light trucks sold at an annual rate of 16.3 million in September, the analysts estimated. That's higher than the 15.9 million rate in September 2001, when the terrorist attacks rattled consumers and General Motors initiated no-interest financing to spur sales. This month's expected rate lags the 16.9 million pace for 2002's first eight months.

Asian automakers are expected to have gains of 10 percent for Toyota Motor Corp. and Honda Motor Co. and 14 percent for Nissan Motor Co., according to Luckey Consulting Group, which tracks both U.S. and overseas-based automakers.

General Motors

General Motors, the largest automaker, was low on some light trucks at the start of September after higher-than-expected sales in July and August, analysts said. That may result in sales and market-share declines this month, even as General Motors got a boost in late September by reviving the loan offers on 2002 models, they said.

"GM is expected to see a decline in market share for the first time in nine months," Banc of America Securities analyst Ronald Tadross said in a report last week. Chrysler and Ford will benefit because they had more vehicles available and easier year-earlier comparisons, he said.

General Motors' inventory at the start of September was 803,478 cars and trucks, or a 62-day supply, below an optimal 962,288, or 75 days, Tadross said. Ford had a 66-day supply and Chrysler's was 73 days, he said. The companies declined to provide inventory figures.

A Ford sales increase would be the automaker's third straight monthly gain, after declines in this year's first six months. The second-biggest automaker had increases of 12 percent in August and 1.5 percent in July. Ford is trying to rebound after a $5.45 billion loss in 2001.

Chrysler will benefit from the comparison with September 2001, when the automaker's sales fell 28 percent, analysts said.

Consumer Confidence

Automakers' financing discounts and cash rebates have helped spur sales even as consumers feel less confident about the economy. The Conference Board's consumer confidence index fell to 93.3 this month from 94.5 in August, the fourth straight monthly decrease.

The possibility of a U.S. war with Iraq has added to consumer concerns about the economy and job security, said Robert Schnorbus, chief economist for market researcher J. D. Power & Associates. Auto and home sales, spurred by low interest rates, remain the economy's bright spots.

Some of the General Motors, Ford and Chrysler incentives, including the 60-month, no-interest loans on 2002 models, end today. Analysts expect the companies to announce new offers as early as this week to maintain demand in the fourth quarter and prevent Asian and European rivals from grabbing more market share.

"The domestic makers are going to come under increasing profit pressures from the high level of incentives, but the loss of market share is going to hurt them just as much," Schnorbus said. "If they lose customers to Toyota and Honda, it's going to cost them even more to win them back."