Car Sales Do a June Swoon for Big Three

Higher interest rates, stock market setbacks and the high price of gasoline have cooled consumer confidence and are slowing auto sales, with the U.S. market idling at year-earlier levels and the U.S. Big Three reporting June sales declines on Monday.

Long seen as a barometer of the economy in general, U.S. auto sales followed the bullish stock market last year to post record sales of 16.9 million passenger vehicles. And the industry was running ahead of that record pace in the first four months of this year before sales dropped off in May and, for the Big Three, again in June.

“You see the wealth effect in operation. People are saving more,” said David Littmann, chief economist at Comerica Bank in Detroit. “The latest [gross domestic product] figures suggest income increases are not matched by spending gains, so the direction of savings is up.”

That translated into June sales declines of 5% for General Motors Corp., 2.6% at Ford Motor Co. and 8.8% for DaimlerChrysler. But some importers went in the opposite direction, including Volkswagen and its Audi luxury unit, the South Korean makers and Japan’s Mitsubishi Motors Corp., which turned in its best month ever.

Overall, U.S. sales were essentially flat in June, growing about 0.2%. Sales had dropped 2% in May, according to Autodata Corp., which tracks new-vehicle sales. But the figures reported Monday do not appear to foreshadow a downturn in the industry for the full year, with sales at the half-year mark totaling 9.12 million units.

Sales are being compared with a very strong month last year, so “it’s hardly a collapse,” said David Healy of Burnham Securities. “The car sales rate could slowly subside for the rest of the year, but not enough to prevent 2000 from being another record year by a small margin.”

Despite June’s cooling off in car and light-truck sales for the Big Three, GM was still up 2.5% for the first half of the year. Ford was up 5.5% for the period. DaimlerChrysler was down 2.6%, a result of plummeting sales of Plymouth, a brand that will be discontinued after the 2001 model year.

“We’ve moved from blistering sales to robust sales,” said Theodor Cunningham, DaimlerChrysler’s executive vice president for global sales and marketing.

But first-half declines in the stock market--9% for the Dow Jones industrial average and 2.5% for the tech-heavy Nasdaq--”suggest less enthusiasm” on the part of consumers, said Comerica’s Littmann.

“Consumer confidence, though high, has fallen compared with earlier in the year,” he said. That suggests a leveling off of car sales this summer, he added.

Littmann predicts that gas prices will come down and the Federal Reserve will ease off on further interest rate hikes. With that, he sees consumer confidence rising in the fourth quarter and renewed strength in auto sales in the fall.

“The industry has been running at phenomenal levels for about two years now,” said Bill Lovejoy, GM’s group vice president for North American vehicle sales. “In fact, the entire industry sold about a million more units in the first half of this year versus last year.

“While we’re disappointed that our sales are down, volumes are still strong and we continue to sell a richer vehicle mix.”

That mix of passenger cars versus light trucks (minivans, pickups and sport-utility vehicles), is significant because the profit margins on trucks generally are much higher than those for passenger cars, and auto makers see profits grow as consumers purchase more and more trucks.

Last year, American consumers for the first time bought nearly as many trucks as cars, about 8.5 million of each, in contrast to a lopsided 9 million passenger cars and 2 million trucks in 1980.

The trend toward trucks may slow with higher gasoline prices affecting household costs and the introduction of appealing new luxury cars, in particular from BMW, DaimlerChrysler’s Mercedes-Benz unit and Toyota Motor Corp.’s Lexus. Instead of light trucks surpassing car sales, Littmann predicts another dead heat for 2000.

For the first six months of the year, GM sold 2.64 million vehicles, giving it a market share of 28.9%, down from 30%, according to Autodata. Sales at GM’s Pontiac division fell 4.1%; Buick was down 9.5%; and Oldsmobile sales plunged 19.6%, pulled down by the slow-selling Intrigue. Sales at GM-owned Saab were down 7.2% for the six months.

Ford sold 2.28 million cars and trucks for a first-half market share of 25.1%, down slightly from 25.2%. Mercury was the disappointment for Ford, slipping 12% as demand eased for its Cougar and Mystique cars and Villager minivan.

DaimlerChrysler sales, including Mercedes-Benz, reached 1.45 million units from January to June, for a 15.9% market share.

Among imports during the first half of the year, VW marked its best June in 27 years, with the popular Passat and Jetta pushing six-month sales up 18.6%. The company’s Audi division did even better, rising 42% on the strength of its A4 and TT models.

Sales at Ford-owned Jaguar, meantime, leaped 70.5% for the January-June period, thanks to strong sales of its new S-Type sedan.

Mitsubishi scored its best-ever month in June, up 41.3% overall, thanks to strong sales of its Montero SUV and Galant sedan. Toyota’s sales rose 16.7%, led by a redesigned Avalon sedan and Celica coupe, although its stalwart Camry and Corolla models were down slightly for the year so far.

Honda Motor Co.’s sales rose 9% for the first half despite a slight dip in sales of its flagship Accord. Nissan Motor Co., according to Autodata estimates in advance of the company’s formal sales report Wednesday, rose 19.9% on strong sales of its Xterra SUV and Frontier compact pickup. Nissan’s Infiniti luxury division also climbed 27.2%.

Ford-controlled Mazda was up 3.1%, while truck specialist Isuzu, 49%-owned by GM, was estimated to be down 1.9%.

South Korean makes continued to expand strongly. Over the first half of the year, Kia sales were up 11.1%, Hyundai rose 72.9% and Daewoo, which only began selling cars in the U.S. in 1998, saw its sales zoom 203.2%.