November Auto Sales Improving

November 28, 2002; Bill Koenig writing for Bloomberg News reported that U.S. auto sales probably improved in November, after the biggest monthly decline in 11 years last month. Demand is being led by luxury models such as General Motors Corp.'s Hummer H2 as consumers grow more optimistic, analysts said.

The decline narrowed to 13 percent from a year ago compared with a 27 percent drop in October, according to the average forecast of five analysts surveyed by Bloomberg. Sales are expected to drop 13 percent at General Motors, 19 percent at Ford Motor Co. and 16 percent at DaimlerChrysler AG's Chrysler.

Demand for vehicles such as the $30,000 Cadillac CTS and the $48,800 Hummer H2 has increased as automakers introduced new or redesigned models, analysts said. Carmakers also benefited from a rebound in consumer confidence, with a University of Michigan survey showing a gain in November, the first in six months.

"I feel a sense of optimism among clients," said Gordon Wangers, president of Automotive Marketing Consultants Inc. in Vista, California. "Discretionary spending ain't going away."

The annual sales rate for November is forecast at 15.9 million cars and light trucks, down from 17.8 million in November 2001, according to analysts. Last year's results were boosted by no-interest loans that U.S. automakers used to revive demand after the Sept. 11 terrorist attacks.

The October rate was 15.5 million, the lowest since August 1998, according to Autodata Corp. The companies report sales on Dec. 3. U.S. auto sales rose 8.2 percent in July and 13 percent in August, according to Autodata, after automakers led by General Motors revived no-interest loans to clear 2002 models.

Much of the October decline "was payback from excessive sales in July and August," said Burnham Securities analyst David Healy, who owns Ford shares. "The real rate of car sales is somewhere in-between" the July-August and October results.

General Motors this month scaled back no-interest loans, doing away with four- and five-year zero percent loans on 2003 models while keeping three-year no-interest financing with no down payment and no monthly payments for 90 days. The world's largest automaker is instead offering consumers more cash back on 2003 cars and trucks.

"Mr. Consumer is done buying sweaters, and has once again turned his attention to cars, if only modestly," Goldman Sachs analyst Gary Lapidus wrote in a report.

General Motors is benefiting from the introduction of more new car and trucks models than rival Ford, the second-largest automaker, said Diane Swonk, chief economist at Bank One Corp.

The company has redesigned the Chevrolet Silverado and GMC Sierra, updated the Chevrolet Cavalier, Pontiac Sunfire and Saturn L series and added longer versions of the Chevrolet TrailBlazer and GMC Envoy.

Ford's Jaguar, Aston Martin and Land Rover luxury brands as well as the Thunderbird have been bolstered by appearances in the James Bond movie "Die Another Day," which opened as the No. 1 film in the U.S. and Canada last weekend with $47.1 million in ticket sales.

"Ford is getting a little bump from the Thunderbird and Jaguar and James Bond but that's not enough," Swonk said. Ford last year introduced a new two-seat Thunderbird car and has brought out lower-priced Jaguar luxury cars to increase sales of that brand.

Auto sales are also getting a boost from an improved outlook for the U.S. economy. The University of Michigan's consumer sentiment index increased to 84.2 from 80.6 in October, according to people familiar with the report. The reading is lower than the preliminary November index of 85 reported earlier this month.

"The economy overall continues to be, if not robust, at least mildly improving," said Mike Flynn, director of the University of Michigan's Office for the Study of Automotive Transportation.