Auto Sales Fall Sharply in October

DETROIT -November 1, 2002; Tom Brown writing for Reuters reported that U.S. auto sales fell sharply for a second consecutive month in October as automakers faced a tough comparison with a record month last year and diminishing returns from incentives.

Among automakers reporting their monthly results on Friday, Ford Motor Co. said its sales dropped a precipitous 34.9 percent compared with October last year, when industry-wide sales hit a record high.

The results exclude the Jaguar, Land Rover and Volvo brands controlled by the world second-largest automaker, which is struggling to implement a multiyear turnaround plan after last year's loss of $5.45 billion.

Similar to the downbeat month at Ford, the Chrysler side of DaimlerChrysler AG said its October sales fell 31 percent.

Toyota Motor Corp. said its U.S sales dropped 21 percent, meanwhile, with sales at its luxury Lexus division down 22 percent.

Nissan Motor Co. Ltd. said sales by its core Nissan division in North America fell 12.6 percent. The drop in sales by Japan's third-largest automaker was partly due to effects of the West Coast dock workers' lockout early last month, company officials said.

But Bill Kirrane, Nissan Division's regional director, said declining sales were also due to the recent fall in U.S. consumer sentiment, which hit a nine-year low last month.

"The zero APR issue has kind of run the gamut," Kirrane told Reuters.

He was referring to how interest-free loans, first introduced for car buyers a year ago, appeared to have lost much of their appeal.

U.S. consumer sentiment has fallen for five straight months and hit a nine-year low in October. But consumer spending has remained healthy in part through lower interest rates and the lowest mortgage rates in decades.

Automakers have been able to keep buyers coming into showrooms through an array of incentives such as interest-free loans and cash rebates. Federal officials said earlier this week that much of the U.S. economy's growth in the third quarter came from auto sales.

Incentives declined in September from a peak in July and August, when sales hit a rate of 18.7 million vehicles. That burst of sales may have pulled forward sales from September and October, but analysts suspect automakers will fight any serious softening in the market with more deals.

Among luxury automakers, German sports car nameplate Porsche AG said its North American sales dropped 5.7 percent in October.

"Porsche attributes the slight decline to receding consumer confidence in the United States," the company said.

Mercedes-Benz said its U.S. sales declined 1.5 percent, meanwhile, even though last month was its best October ever in terms of sales. The company said its results were boosted by the recent launch of its all-new E-Class sedan.

Auto sales account for roughly one-fifth of U.S. retail sales and a sudden falloff in demand, after the torrid pace of sales over the summer, could weigh heavily on the slowly recovering U.S. economy.