Sales of Cars and Trucks in August Drop 11.7% as Analysts Worry About Impact of Price Hikes

The snail-like auto recovery stalled again as August sales of cars and trucks fell 11.7% from year-ago levels to their slowest pace since April.

But some company executives, car dealers and analysts insisted that the apparent poor August results masked a continued slow increase in sales to consumers and a rise in showroom traffic.

The industry said Thursday that it sold 1,046,210 domestic and imported cars and trucks in August. That equals an annual rate of 12.1 million vehicles, down sharply from 13.1 million in July and the first such drop in four months.

Despite brave words from numerous industry officials, the August performance prompted warnings that the industry’s recent price hikes could stop the recovery in its tracks.

“These numbers make me skeptical that the overall economy can keep moving forward when the auto industry appears to be backing up,” said Tom Webb, chief economist of the National Automobile Dealers Assn.

A Southern California import dealer wouldn’t even comment for the record because he didn’t want his name published alongside his remark that, “Business is really bad.”

But Ira Cohen, general manager of Tuttle Click Nissan in Costa Mesa, was more sanguine: “There was some slowing in August, but we’re optimistic. I think we’re going to see a turnaround here pretty quick. I’d like to hope so, anyway.”

Car and truck sales by the Big Three U.S. auto firms fell 13.6% as Chrysler, buoyed by strong truck sales, recorded the smallest percentage decline at 8.8%. General Motors sales dropped 13.8% and Ford lost 15.4%.

Sales of vehicles by foreign-based firms were also unimpressive as number one Toyota recorded a 15.2% decline, Nissan fell 6.2% and Subaru tumbled 31.6%. Honda and Mazda managed small increases and Mitsubishi and Isuzu jumped 22% and 32%, respectively. Other imports, mostly European, fell 15% as a group.

The pace of car and truck sales, which tumbled along with consumer confidence last winter in the months leading up to the war in the Persian Gulf, bottomed out in January but fell again in April. This latest setback had economists and marketing experts working overtime trying to figure it out.

“There has been no fundamental change in the retail market,” declared Robert L. Rewey, sales vice-president at Ford, who said sales in preceding months were inflated by fleet purchases that dropped seasonally in August. By one estimate, 40% of GM’s sales the previous month were to fleet customers.

As a result, he said, “the ongoing pace of the retail car market was somewhat more visible (in August). Our dealers report that their showroom traffic continues to improve slowly.”

Another theory is that the industry’s unusually low inventories of cars and trucks, generally considered a good sign in a weak market, have actually made it harder for customers to buy.

Edward J. Sullivan of the WEFA Group in Bala Cynwyd, Pa., calculates that if current sales forecasts and production schedules hold firm, stocks of cars will tumble from 55 days to a miniscule 36 days by the end of the year. Sixty-five is considered normal.

“They might be choking some consumers out of the market,” Sullivan said, but he added that he is not yet ready to lower projections for the rest of the year.

“We are concerned about the weakness in August but are right now discounting it. We believe the consumer will come back.”

* JOBLESS CLAIMS

The number of new filings held steady in late August. D2

Vehicle Sales

Seasonally adjusted annual rates for U.S. sales of cars and trucks. Domestic figures include vehicles built in the United States by Japanese auto makers. The figures use seasonal patterns to predict the auto industry’s sales rate over a full year.

In millions of vehicles 1990 Aug: 13.7 Sep: 14.4 Oct: 13.5 Nov: 12.7 Dec: 12.7 1991 Jan: 11.1 Feb: 11.8 Mar: 12.4 Apr: 11.2 May: 12.4 June: 12.9 July: 13.1 Aug: 12.8 Source: U.S. Department of Commerce

* European luxury car sales, victimized by Japanese competition and the luxury-car sales tax, continued to plummet. A 21% fall at Mercedes-Benz helped explain the company’s announcement that it is eliminating 113 jobs from its 680-strong U.S. headquarters work force in Montvale, N.J.

* Chrysler demonstrated that it is mostly a truck company these days as trucks accounted for about 60% of its August sales and helped to offset its dismal performance in the car market.