US Auto Sales Fall In December 2003

CHICAGO January 5, 2004; Ann Keeton writing for Dow Jones reported that despite continued incentives for buyers and a stronger economy, December U.S. auto sales came in below last year, automakers reported Monday.

U.S. auto industry sales for the month were 18 million, on an adjusted annual rate, according to the research firm AutoData. That was lower than the 18.2 million adjusted rate for December of last year, but better than November's 16.8 million vehicle sales rate, a sign that good sales momentum should continue into 2004.

General Motors Corp.'s December sales were down 9% compared with last year.

The world's biggest auto maker said truck sales fell 11% and car sales dropped 5%. The company said it faced an especially tough comparison to last year, when sales jumped 38% in December. GM led the industry with heavy incentives for buyers, including cash back and no-interest financing.

At Ford Motor Co., December sales fell 4%, with truck sales up 2% and cars down 16%.

The Chrysler Group, the U.S. unit of DaimlerChrysler AG, eked out a 2% sales gain for the month, with truck sales up 6%, while car sales fell 16%.

GM and Chrysler adjusted their sales figures for 26 selling days last month, compared with 25 selling days a year ago. Ford didn't make that adjustment.

Trucks and sport utility vehicles continued to carry the load for domestic auto makers, with Ford's F-150 pickup making a very strong showing. F-series sales rose 16% in December, with sales of the F-150 model up 38%.

Chrysler said its Chrysler brand car and truck sales were up 33%, with Sebring, PT Cruiser and Voyager coming in with double-digit increases.

GM said its Cadillac division saw sales increase 7% in December, leading to the brand's best sales year since 1990.

December was a strong month for auto makers, according to industry watchers, with sales beating many forecasts.

Analyst David Healy with Burnham Securities said he had expected annual adjusted sales for the month of just 17.8 million. A strong showing by GM made the difference, he said. Healy had forecast a 19% sales drop for GM in December. GM finished the month with a healthy market share "that suffers only by comparison with the year ago" Healy said, when the world's biggest auto maker had an "abnormally" high share of 32%, after pouring on incentives.

The analyst doesn't own shares of GM, Ford or DaimlerChrysler, and his company has no investment banking with the auto makers.

Paul Taylor, chief economist with the National Automobile Dealers Association (News - Websites) , said consumers - despite their widely reported optimism - are careful shoppers. Auto makers have begun increasing prices on new car models, while offsetting the increases with incentives. In 2004, they plan to ease back on incentives as they introduce a wave of new car models. But Taylor said, cautious consumers "may put off purchases or shift to other models or makes" if they don't get good deals.

"The big news is what a good year 2003 has been for the auto industry," said Steve Patton, a consultant with Cap Gemini Ernst & Young. "Despite the troubled economy, the incentive push kept consumers buying." With sales of 16.6 million light vehicles, 2003 was one of the top five years for auto sales.

In 2004, Patton said, he looks for domestic car makers to renew their focus on cars, as Asian manufacturers fight their way into the truck market, where U.S. makers have held the turf. "The race to watch is Chrysler versus Toyota," he added. With Chrysler losing market share and Toyota gaining, the two companies will be vying for third place in the U.S. auto market.

As early as the first quarter, Patton said, it should become clear whether manufacturers can begin to cut back on incentives, as they hope to do. Consumers may well demand cash back or financing deals, even on new car models, he said.