Sales of New Cars, Trucks in US Sluggish in March

DETROIT March 26, 2004; John Porretto writing for the AP reported that sales of new cars and trucks have remained relatively sluggish in March, though analysts say tax refunds and heftier consumer incentives should provide something of an industry pick-me-up.

Goldman Sachs and Merrill Lynch both predict a seasonally adjusted annual sales rate for March of 16.6 million units, up 3 percent from a year ago but still soft given that March typically marks the start of the spring selling season.

The seasonally adjusted annual sales rate, known as SAAR, indicates what sales for the full year would be if they remained at the same pace for all 12 months. The rates were 16.1 million in January and 16.4 million in February, following full-year sales of 16.7 million units in 2003.

Major automakers report U.S. sales for March on Thursday.

In a research note, Goldman Sachs analyst Gary Lapidus said he expects the final tab for incentives to be up sharply for March. He cites in particular DaimlerChrysler AG's Chrysler Group, which has beefed up deals significantly as it tries to clear out old models ahead of nine new or redesigned vehicles this year.

"Following unprecedented tax cuts, auto sales should enjoy an unusually good refund season, although the full effect will not be felt until April and May," Lapidus said.

David Healy, who tracks the industry for Burnham Securities, predicts a SAAR of 16.5 million units for March. He said dealer stocks are on the high side, which could mean profit-curtailing production cuts from some automakers in the second and third quarters.

"The huge increases in sales incentives that took place in early 2003 probably harvested any `pent-up demand' that might have existed in the marketplace," Healy said. "Accordingly, if there is such a thing as `pent-down demand,' we're having it now."

Healy and Lapidus both predict General Motors Corp. and Ford Motor Co. will post positive sales numbers for March, while they expect Chrysler to be down. Both analysts forecast foreign brands to be up 2 percent.

Through February, Detroit's Big Three automakers reported a 1.7 percent rise in overall sales compared with the same period last year. Asian brands were up 11.4 percent, while European nameplates were off 9.3 percent.

In an industry report card released Thursday, Standard & Poor's said it still expected a slight uptick in overall U.S. sales this year, helped by an improvement in general economic conditions.

However, on a less positive note, the ratings agency said "difficult long-term trends will predominate." Specifically, S&P said intense competition and the persistence of excess production capacity will likely contribute to "subpar" financial performances at GM, Ford and Chrysler.