Kelvin, tomorrow's April auto sales figures will tell a very different story from what we've heard since Friday.
Regards,
Tom
Thursday April 26 10:57 AM ET
Vehicle Sales Seen Down, Confidence
Ebbs
By Michael Ellis
DETROIT (Reuters) - After three months of surprisingly strong U.S.
automotive sales, it seems many American consumers pocketed their
check books and stayed away from new car and truck dealerships in
April.
Finally reflecting the drop-off in U.S. consumer confidence (news -
web sites) levels, results from automakers due Tuesday will show U.S.
car and light truck sales fell 8 to 12 percent in April to their weakest
levels since December, industry experts say.
``It appears that the next shoe to drop is dropping. April is clearly
coming in weaker than expected,'' said John Casesa, an analyst with
Merrill Lynch.
Even as they continued to ratchet up cash-back rebates and other
incentives, sales for the traditional Big Three automakers, General
Motors Corp. (NYSE:GM - news), Ford Motor Co. (NYSE:F -
news) and DaimlerChrysler AG's (NYSE:DCX - news)(DCXGn.DE)
Chrysler brands -- excluding GM's Saab and Ford's Jaguar, Land
Rover and Volvo import brands -- are expected to have fallen by
double digits.
Chrysler, which on Wednesday reported an operating loss of about
$1.2 billion in the first quarter, is seen taking the biggest beating, with
sales seen down from 15 percent to more than 20 percent, analysts
said.
The weaker results could spur the Big Three to cut vehicle production
forecasts for the second quarter, which would hurt earnings and
employment, analysts said.
Conversely, Japan's Toyota Motor Corp. (news - web sites) (7203.T)
and Honda Motor Co. (news - web sites) (7267.T) as well as the
Korean automakers should continue to pick up market share, analysts
said.
When consumer confidence began its steep drop in January following a
slowdown in the U.S. economy, analysts confidently predicted a
drop-off in auto sales, only to be surprised by the actual results.
First-quarter U.S. light vehicle sales beat all expectations, coming in at
a seasonally adjusted annual rate of about 17.3 million units.
Now April sales are expected to drop to between 15.9 million and
16.5 million, analysts said. That's down from a record 18 million in
April last year.
``Wealth Is Evaporating''
The widely watched University of Michigan consumer confidence index
dropped a steeper-than-expected 3.7 in April to 87.8 in April, its
lowest level in more than seven years. A similar gauge conducted by
the U.S. Conference Board (news - web sites) slid sharply in April to a
4-1/2-year low.
``Announced layoffs are rising, manufacturing and technology appear to
be in or near recession, household wealth is evaporating and the
savings rate is at a 50-year low,'' analyst Gary Lapidus of Goldman
Sachs wrote in a research report.
Actual results for April this year may better the reported figures. Some
dealers included April 1 sales in March totals. That effectively
discounts one of the 25 selling days in April, which could hurt reported
results by about 4 percent, analysts said.
On the other hand, the U.S. Federal Reserve (news - web sites)
surprised all with a sudden half-point cut in interest rates on April 18,
after the consumer confidence surveys were conducted.
In addition, the U.S. Commerce Department (news - web sites) said
on Wednesday that U.S. home sales rose at a record rate in March,
contradicting the consumer confidence surveys.
``Actions have been speaking louder than words for some time now,''
said Diane Swonk, chief economist with Bank One Corp. in Chicago,
who is predicting an April sales rate of 16.5 million units.
Rising gasoline prices, topping $2 a gallon in Chicago and San
Francisco, are expected to have no impact on sales. But analysts fear
that if the trend continues, some consumers may buy smaller vehicles,
or worse, it could hurt the U.S. economy, which would impact sales
further.
Most analysts expect sales to continue to soften in the second and third
quarters.
Ford Chief Financial Officer Henry Wallace said earlier this month that
he expects sales to bottom this summer before strengthening again on
the back of lower interest rates in the fourth quarter.
``I think we're going to see some weakness in the middle quarters of
the year,'' he said following the release of Ford's first-quarter earnings
on April 19. |
