GM, Chrysler Report Strong Sales in May
Chrysler Corp. and General Motors Corp. on Monday reported unexpectedly strong May sales, fueling concern that the economy may be growing too fast.
Chrysler’s U.S. sales jumped 17% compared with a year ago, to a monthly record, helped by big rebates on cars and a better supply of the company’s hot-selling minivans. GM’s sales rose 7.2% from May 1995, about double what analysts expected, on rapid sales of Chevrolet Cavalier cars and Tahoe sport-utility vehicles (known as light trucks in the industry).
The seemingly good news for the auto makers raised the specter of accelerated inflation among bond traders and economists. Bond prices fell on fears that the Federal Reserve Board will raise bank lending rates to keep inflation under control.
“The slowdown is behind us,” said Robert Dederick, an economic consultant for Northern Trust Co. in Chicago. “The issue now is, is inflation going to be a problem?”
Earlier Monday, the Conference Board said its index of leading economic indicators--designed to predict U.S. economic activity over the next six months--rose for the third month in a row in April.
The reports from the Conference Board and Chrysler sent the yield on the benchmark 30-year Treasury bond up 0.02 percentage points to a close of 7.01%. GM reported its sales after the markets closed.
Chrysler’s car sales, which haven’t been as strong as its light-truck sales in almost a year, rose an impressive 20% in May from the year-ago month. Meanwhile, minivans, in short supply last year as factories changed over to a new model, helped push Chrysler’s light-truck sales up 16%.
“Chrysler continues to be extremely well positioned. The company can do very little wrong and that will continue into ‘97,” said Paul Ballew, chief economist for J.D. Power & Associates.
Chrysler shares closed up $1.125 at $67.75 on the New York Stock Exchange.
Car sales for GM, the No. 1 auto maker, rose 6.6%, while sales of minivans, pickups and sport-utilities rose 8.1%.
GM shares rose $1 to $56.125 on the New York Stock Exchange.
Analysts expect industry sales for the month to rise 5% to about 15.1 million vehicles, compared with a revised 14.4 million in May a year ago.
Still, some industry executives expect a slowdown in sales in the second half. Other economic reports Monday, such as the National Assn. of Purchasing Management’s index of manufacturing activity, also supported the notion of a gradually growing economy that doesn’t call for a hike in interest rates.
Though industry sales through May were at an expected annual rate of 15 million to 15.1 million vehicles, industry executives say sales for the year could be as little as 14.8 million vehicles, or up just slightly from last year’s 14.7 million.
Chrysler indicated it wasn’t all that confident that the economy itself will be enough to sustain its strong car sales. The company is extending through July 8 an incentive program that has chopped the price of almost all its cars by $1,000 to $3,500 to entice buyers.
Among Japanese auto makers, Nissan Motor Co. disappointed analysts with a surprising 16% drop in May sales, instead of the small gain anticipated. Nissan said a deliberate reduction in its sales to fleet buyers caused the decline.
