Auto Sales Hit 2003 High, Big Three Fall

DETROIT August 1, 2003; Michael Ellis writing for Reuters reported that U.S. auto sales made their strongest showing of the year in July and provided further evidence of a strengthening economic recovery, even as Detroit's Big Three lost market share to foreign automakers.

Aided by record high incentives and low interest rates, light vehicle sales industrywide hit a seasonally adjusted annual rate of 17.3 million in July, at the top end of analysts' estimates.

"I'm dumbfounded," said Bill Turner, an equity analyst with Bank One Investment Advisors. "Who knows where the consumer is getting all their money, but they continue to buy cars."

Sales fell 4.5 percent from last July when automakers revived zero-percent financing offers and sales hit an annualized rate of 18.1 million.

While many import automakers reported stronger results on Friday, Detroit's General Motors Corp. , Ford Motor Co. and the Chrysler arm of DaimlerChrysler AG all dropped from last year.

Despite offering cash rebates of up to $4,000, Detroit automakers have lost about 1.5 percentage points of U.S. market share since the beginning of the year, mostly to Japan's Toyota Motor Corp. and Honda Motor Co. Ltd.

Ford's sales fell 11.5 percent in July from a year ago, hitting analysts' estimates for a double-digit drop, excluding its foreign brands Volvo, Jaguar, Land Rover and Aston Martin.

The percentage change for all sales is adjusted to reflect an extra selling day in July versus last year.

Both the Toyota and Honda brands sold more cars than the Ford brand last month.

"You look at the car lineup they Ford have. What car do they have that's remotely fresh in the last few years?" said Jim Sourges, vice president of the auto segment at Cap Gemini Ernst and Young.

"BEST MONTH OF THE YEAR"

"Despite a decline in relationship to high year-ago levels, this is going to be the best month of the year for the industry," GM's sales analyst Paul Ballew told analysts and reporters.

GM, the world's largest automaker, said it's July sales dropped 5.8 percent, excluding its Saab brand, slightly better than dire predictions of a double-digit drop. GM's truck sales in July were the strongest of 2003 but were still down 1.5 percent from last year.

Chrysler, which lost $1.1 billion in the second quarter due to the high costs of incentives, said its sales fell 7.6 percent, steeper than analysts had expected.

Still, Ford, GM and Chrysler saw some signs of encouragement in July's results. While all three reported a steep drop in cars, sales of highly profitable pickup trucks, sport utility vehicles and minivans fell only slightly, indicating America's appetite for large vehicles remains healthy.

Meanwhile, most foreign automakers reported stronger sales, in part due to new trucks. Japan's three top automakers -- Toyota, Honda and Nissan Motor Co. Ltd. -- were all stronger.

July was also a strong month for foreign luxury brands. Low interest rates, tax rebates and extra cash from refinancing mortgages have helped some consumers move up to more expensive cars and trucks.

DaimlerChrysler's Mercedes luxury brand posted a 20.6 percent jump in sales, while its German rival BMW AG scored a 10.1 percent jump. Volkswagen AG's Audi rose 7 percent, and Ford's Volvo gained 10.5 percent.

Korea's Hyundai Motor Co. Ltd. and Kia Motors Corp., which had been gaining U.S. market share in recent years, both posted weaker results.