August auto sales seen steady, gains for Toyota

BLADDER_MASTER · Sep 1, 2006

August auto sales seen steady, gains for Toyota

DETROIT (Reuters) - U.S. automakers surrendered more market share in August as sales incentives and gains by Asian automakers kept overall sales steady, analysts said on Thursday, a day before car makers release monthly U.S. sales results.

The results will provide a gauge of the pressures facing the Detroit-based car makers and an indication of the strength of U.S. consumer demand in the face of higher interest rates and a slowing housing market.

Overall U.S. auto sales on a seasonally adjusted and annualized basis are expected to be near 16.8 million units.

That would be down from 17.2 million units in July but up slightly from 2005 when sales softened as sweeping discount programs from earlier in the summer ended, analysts said.

Japan's Toyota Motor Corp. , which surpassed Ford Motor Co. as the No. 2 player in the U.S. market in July, is seen on track for another strong month of sales gains due to its gains in the growing market for more fuel-efficient cars.

Toyota has posted a market-leading 10-percent growth in sales through the first seven months of the year. Those gains are expected to continue in August and the remainder of 2006 because of the success of offerings like the sold-out 2007 Camry.

"The trend of Asian market share gains and domestic market share losses will continue," Standard & Poor's equity analyst Efraim Levy said. "Toyota will keep its steady rise on track."

The U.S. market share for General Motors Corp. , Ford Motor Co. and the Chrysler group -- the traditional Big Three -- slipped to 53.3 percent in August from 55.4 percent a year earlier, according to a forecast by auto tracking Web site Edmunds.com.

GAIN SEEN FOR GM, DECLINES FOR FORD, CHRYSLER

General Motors has had the worst sales performance in percentage terms this year of any of the major car makers.

Last summer, the world's largest automaker boosted sales volumes and kept production lines running by resorting to employee-level pricing for any buyer -- a move that drew Detroit into a costly price war and cut into profitability.

But despite GM's 14-percent drop in vehicle sales so far this year, analysts have praised the automaker for sticking to a strategy of avoiding similar discounts this year and posting less volatile sales results.

In August, GM sales are expected to be up from year ago levels, mainly due to easier comparisons from last year, analysts said.

"August will be a modest positive for GM," Argus Research analyst Kevin Tynan said. He added: "It's not organic growth. It's just about comparisons."

Edmunds.com forecast sales at Ford and Chrysler would fall 15 percent each from year-earlier levels.

Chrysler -- like both Ford and GM -- has been hurt by a product line that relies heavily on pickups and sport utility vehicles, which have lost popularity with American buyers seeking better fuel efficiency as gasoline prices have risen.

Looking to run down an inventory of unsold trucks and SUVs, Chrysler offered revived employee discounts in August, but the offer failed to catch fire with consumers as it had a year earlier, Edmunds.com analyst Jesse Toprak said. "The second time out it did basically nothing," he said.

Chrysler is expected to roll out a zero-percent financing offer in September, while Ford has already zero-percent financing that will extend to less credit-worthy borrowers.

Toprak said that move could broaden the potential market for Ford's concessional financing by 40 percent or more. "That, I think, is going to be huge," he said.

PRODUCTION CUT, PRESSURE ON MARKET SEEN

GM, Ford and Chrysler have all cut third-quarter production to bring inventories in line with demand. Overall U.S. sales have slipped 5 percent so far this year.

Ford also slashed fourth-quarter production by 21 percent, citing weaker sales of its market-leading pickup trucks. Chrysler has also reduced year-end production by an unspecified amount.

GM has not commented on fourth-quarter output, but analysts said it could announce a cut in planned output on Friday.

In the coming months, higher oil prices, a weaker housing market and slowing growth in job creation will increasingly weigh on the U.S. auto market, said Global Insight analyst George Magliano.

"We are now in an environment where it's going to be very difficult for everyone to operate," he said. "There are going to be winners and losers but it's going to be hard for everyone."

Copyright 2006 Reuters

Source: http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=OBR&Date=20060831&ID=5987631

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August auto sales seen steady, gains for Toyota

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