June car sales plummet; more declines expected

[July 02, 2008]  DETROIT (AP) -- A last-minute no-interest financing offer and strong sales of some cars helped General Motors Corp. keep its U.S. sales over Toyota Motor Corp. last month, but it was still the worst June for the industry in 17 years and a harbinger of more misery ahead.

"We're going to continue to see declines for the rest of the year," predicted Jesse Toprak, chief industry analyst for auto information site Edmunds.com.

All major automakers but Honda Motor Co. reported steep sales declines for June as buyers continued to flee from trucks and sport utility vehicles to more fuel-efficient models. High gas prices and a sluggish economy helped keep sales low.

Even Toyota, with its flexible, efficient factories, couldn't make the shift from trucks to cars as quickly as American drivers. Its sales for June shrank 21 percent from a year earlier, and it fell far short of some analysts' predictions that it would overtake GM.

June sales at GM had a still-dramatic drop of about 18 percent, as the overall market fell 18.3 percent, according to Autodata Corp.

GM sold about 262,000 vehicles in June, about 69,000 more than Toyota. Car sales were down 21 percent at GM and 9 percent at Toyota. Truck sales were down 16 percent at GM and nearly 39 percent at Toyota.

But Toprak said late-month incentives helped push GM sales after a slow start to June. The company also reported sales increases of more than 20 percent for several car models, including the Chevrolet Cobalt, Pontiac G6 and Chevrolet Malibu.

Still, Toprak said many automakers simply did not react quickly enough to the staggering rise of gas prices.

"I think the gas price rise that we've seen from March through June was so fast and so dramatic that even Toyota, which is known to really forecast consumer demand, was caught off guard," he said.

As the market shifted, some automakers were caught with too few of the smaller cars.

That includes Toyota, which didn't have enough of its fuel-efficient Prius, Corolla or Yaris cars at dealerships to keep up with demand. Prius sales were hurt by a battery shortage, while sales of the Corolla and Yaris suffered because of plant capacity.

When consumer tastes change as quickly they have this year, it's tough for automakers to react in a matter of months. Additional workers have to be brought in to factories and trained to build different cars.

Ford has been trying to raise output of the lone factory near Detroit that makes the Focus compact but still couldn't meet demand this month. Both GM and Ford have announced plans for new subcompacts, but it will take at least two years to gear up factories for the new products.

"That just shows the market forces changed extremely fast. No automaker was ready for it," Toprak said.

Only Honda, whose lineup is tilted toward smaller and more fuel-efficient cars, reported a sales increase for June -- slightly over 1 percent. Honda car sales were up nearly 20 percent, truck sales down 24 percent.

Elsewhere, the picture was far worse. Nissan Motor Co. reported sales off nearly 18 percent. Sales at Ford, which still relies on trucks and SUVs, plunged almost 28 percent. And Chrysler LLC took a huge hit -- down nearly 36 percent.

To help boost sales, Chrysler said it would extend its offer of $2.99-per-gallon gas through July 31. It had been scheduled to expire July 7. Chrysler pays the difference between $2.99 and the pump price for 12,000 miles a year under the offer.

The promotion started in May, but car sales at Chrysler still fell by almost half. Its truck sales dropped 30 percent.

The overall market dropped to 1.19 million vehicles sold, down more than 266,000 from last June. U.S. car sales were down about 10 percent for the first half of this year.

Ford sold 41 percent fewer of its perennial best-seller, the F-series pickup truck, and it sold fewer than half the number of Explorer SUVs as it did in June 2007.

George Pipas, Ford's top sales analyst, said SUV sales are probably down for good.

"Our view is that gas prices aren't likely to go down, and more importantly, many consumers have moved on," he said. "We believe that the segment has merit for certain consumers but is not likely to rebound at any point."

Toyota overtook General Motors Corp. in global sales earlier this year. It passed GM for global vehicle production last year.

Ford stock sank to a 52-week low of $4.41 early Tuesday but recovered to finish at $4.71, down 10 cents. They have traded as high as $9.64 over the past year.

GM managed to beat analyst estimates. Mark LaNeve, GM's vice president of North American sales, said it was not possible to figure out how much GM's month-ending three-day sale boosted June sales.

Shares of GM -- which on Monday traded at their lowest point in more than half a century, according to the Center for Research in Security Prices at the University of Chicago -- rose 25 cents Tuesday to close at $11.75.

The Associated Press reports unadjusted auto sales figures, calculating the percentage change in the total number of vehicles sold in one month compared with the same month a year earlier. Some automakers report percentages adjusted for sales days. There were 24 sales days last month, three fewer than in June 2007.

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On the Net:

Ford Motor Co.: http://www.ford.com/

Toyota Motor Corp.: http://www.toyota.com/

General Motors Corp.: http://www.gm.com/

Honda Motor Co.: http://www.honda.com/

Chrysler LLC: http://www.chrysler.com/

Nissan Motor Co.: http://www.nissanusa.com/

[Associated Press; By TOM KRISHER and DEE-ANN DURBIN]

AP Business Writer Bree Fowler in New York contributed to this report.

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