Are Car Sales Starting To Sputter?

A larger than expected slip in car and truck sales from July to August is raising fears that the recovery may be starting to stall. But, the major auto makers say there is still some underlying growth.

The seasonally adjusted annual sales rate--as measured by Automotive News--fell to 10.8 million units, it's lowest rate since February. July's rate, by contrast, was 11.6 million units.

"It continues to tell us that we're in a very slow recovery, and we're not just going to continue to move up leaps and bounds every month," says J.D. Power and Associates analyst Jeff Schuster, who blames weak consumer confidence, and the relative lack of incentives.

Ford sales dropped five per cent from July to August. GM sales slipped seven per cent. Toyota sales were off 12 per cent.

Despite the weakening in the auto market, most carmakers are sticking with predictions of a gradual recovery.

"While there's a lot of talk about what the pace of the recovery is, said Don Johnson, GM's vice president of sales operations. "We definitely see the recovery continuing, albiet at a much more modest pace."

Year over year sales numbers have been distorted by very strong sales in August of 2009, boosted by the federal Cash for Clunkers program.

Toyota, which received the most benefit from that program, saw it's sales down 34 per cent from last August. GM sales were off 25 per cent year to year...but sales were actually up from last August for the Cadillac, Buick and GMC brands.

"When you look at three of our brands, they really bucked the trends and were up," said Don Johnson, G.M.'s vice president of sales operations.

Chevrolet got a lot of benefit from Cash for Clunkers last year.

"The story in Chevrolet is that last year cash for clunkers was very successful," said Johnson. "This year, Chevrolet is still up year to date 19 per cent, and looking for a good fourth quarter as we launch the new Cruze."

Also, potential buyers are having a harder time getting big discounts. Ford sales are off about eleven per cent from last year. It was also a big beneficiary of Cash for Clunkers last year. Chrysler, which didn't get a lot of help from the federal program, says it's sales are up seven per cent from last August. Chrysler was also one of the few companies to see sales go up from July to August

"We're building more of our brand new 2011 Jeep Grand Cherokee," says Chrysler spokesman Ralph Kisiel. "That's drawing customers into the showrooms."

Analysts say new products coming into the market in the next few months could boost sales. Labor day weekend is also generally a busy weekend at car dealers. There was some evidence that customers could be waiting to see if the holiday weekend will bring good deals.

J.D. Power's Jeff Schuster says that could mean a sales improvement in September. He says if you average out the strong and the weak months, sales remain on the trend level we've been seeing all year.

"You're gonna have ups and downs as we've been calling all year, but when you look at a trend and look at an average, we're still in that 11 and a half plus range for the year."   

(Copyright 2010 WWJ Radio.  All Rights Reserved. The Associated Press contributed to this report).