Woes may loom for US auto firms
DETROIT -- Soft auto sales in April could spell trouble down the road for Detroit's three automakers as they restructure and try to lure buyers away from strong foreign brands, several industry analysts say.
Five predicted that US sales will be down in April, compared with the same month in 2006, and in a down market that continues to shift from trucks to cars, that means trouble for Detroit.
The analysts said there doesn't seem to be any pent-up demand. Consumers have too much debt, are facing increased payments due to rising adjustable rate mortgages, or are waiting to see what happens to gasoline prices.
Under those circumstances, it will be difficult for the Detroit Three to execute their turnaround plans because they're competing for a shrinking market, mainly against Honda Motor Co. and Toyota Motor Corp., which both have strong brands.
"It's a very tough environment out there right now," said Joe Barker, senior manager for CSM Worldwide, an automotive forecasting firm. "If you're undergoing a restructuring at the same time that you're trying to go after a smaller pool of consumers, it just adds to the complexity of a turnaround plan."
Ford Motor Co., General Motors Corp., and Chrysler Group are all at varying stages of turnarounds. All have lost billions in recent years. GM actually made money in the fourth quarter of 2006 and by most accounts is ahead of its US-based counterparts in restructuring.
Barker predicted April sales at an annualized rate of about 16 million vehicles. For the full year last year, US sales were about 16.5 million.
Mark McCready, vice president for Carsdirect.com, said buyers were distracted first by taxes and then by bad weather in the Northeast, and even the mass shootings at Virginia Tech.
If gasoline supplies continue to be stressed, he sees prices going up. Many car buyers, he predicted, will be on the sidelines in April. "I think people are waiting a little bit to see what happens," he said.
The Detroit Three still rely on pickup trucks for sales and profit, and that market will probably continue to decline, said Erich Merkle, with auto consulting company IRN Inc.
Merkle predicted more buyers would go to Toyota and Honda.
Barker said his company's research shows Toyota and Honda have such strong brands it will be difficult for Ford, GM, and Chrysler to persuade buyers to switch when economic times are harder.
"In times of softening demand, consumers typically will look to brands that they trust and rely on. Consumers trust and rely on Japanese brands," he said.
Ford is seeing softening sales industrywide, at least during the first two weeks of the month, said George Pipas, the company's top sales analyst. "We're seeing this throughout the industry. It's not a Ford thing," he said, cautioning that the month could turn around in its final week.