Auto Sales Sluggish, Should Climb in March

DETROIT March 29, 2005; Dee-Anne Durbin writing for the AP reported that higher consumer incentives and warmer weather likely lured consumers back to auto dealerships in March, but sales still are not on track to match last year's levels, analysts say.

March sales are expected to be up from a disappointing February, when industrywide demand was off 1.9 percent from a year ago. Some automakers are finally shaking off the hangover that followed robust December sales, Credit Suisse First Boston analyst Chris Ceraso said in a research report.

Still, this month's sales compared with a year ago are expected to be flat despite a healthier economy. The exceptions likely will be some Asian automakers, who continue to gain share and grow their business with new domestic entries.

Major automakers report March results Friday.

"New-car buyers have not responded to increases in real disposable income that our economic recovery has been generating," Burnham Securities analyst David Healy said in a report. "Price-cutting in terms of cash rebates and easy financing did the trick ... during the recession but left car buyers relatively tapped out."

The traditional Big Three automakers are hurting because of lagging demand for mid-size and large sport utility vehicles. A mix of factors -- including high gas prices, changing consumer tastes and an aging lineup at General Motors Corp. and Ford Motor Co. -- is causing the slowdown, Standard & Poor's analyst Scott Sprinzen said in a report Tuesday.

Analysts predict an annualized March sales rate of between 16.5 million and 16.8 million vehicles. The rate indicates what sales would be for the full year if they remained at the same pace for all 12 months. Full-year sales for 2004 were about 17 million.

Merrill Lynch analyst John Casesa said the selling rate will have to rise to 17.1 million units per month if the industry hopes to match last year's sales. "This year is off to a very slow start," Casesa said in a note.

All eyes will be on GM when March results are released. The world's largest automaker cut production after a 12.7 percent decline in February sales and announced this month its 2005 earnings would be far lower than expected.

GM is trying to reverse the trend this month with cash bonuses of between $500 and $1,500 for slow-selling vehicles. The company also cut sticker prices on 22 of its SUVs, Casesa said.

GM vice chairman Bob Lutz said last week GM expects March sales to be about even with last year. Analysts generally predict GM's sales to be down in March, but the company is expected to recover some market share after falling to a dismal 24.2 percent share last month.

"While we'll be happy to see the industry wake from its slumber, the real focus will be on GM's market share," Ceraso said.

Ford also is expected to see sales about the same or slightly lower in March, though it's expected to be helped on the car side by new entries such as the Ford Mustang and Five Hundred sedan.

Asian automakers and DaimlerChrysler AG are expected to see increases fueled by trucks, such as Honda Motor Co.'s new Ridgeline pickup, and hot-selling cars such as the Chrysler 300 sedan.