Car, Light-Truck Sales Expected to Dip 2% in May

U.S. new-car and light-truck sales are forecast to fall 2% this month, the first decline in nearly two years, as consumers cut spending and auto makers held back incentives, based on estimates from four analysts.

DaimlerChrysler’s Chrysler sales are forecast to fall 15% from May 1999--its best month ever--in part because the firm didn’t boost discounts on its aging product line.

Sales will fall 4% from May 1999 at General Motors Corp. and be little changed at Ford Motor Co.

U.S. sales of new cars and light trucks have risen from the year-earlier period each month since August 1998, powered by an expanding economy that has the lowest jobless rate in 30 years.

The slip comes as price discounts eat into auto maker earnings, interest rates rise and consumers take a breather.

“A lot of people’s portfolios have taken hits these past few months that have made them think twice if they need that new car,” said Gordon Wangers, a partner with Automotive Marketing Consultants in San Diego.

U.S. consumer spending rose in April at the slowest pace in nine months, suggesting that six Federal Reserve interest-rate hikes since June may be damping demand.

“Consumers are going to tap on the brakes, and that’s not a bad thing,” said George Pipas, Ford’s market analyst. “The worst of all worlds would be if the Federal Reserve kept raising rates and we failed to find any sign of slower spending.”

Most major auto makers will report sales Thursday.

It was when last May’s annual selling rate hit 17.3 million that the U.S. auto sales boom began in earnest.

The average estimated annual selling rate for this month is 17 million. Until 1999, annual sales of 15 million were generally considered a strong year.

DaimlerChrysler’s Chrysler unit, which generates 55% of the company’s operating profit, spent an average $1,900 per vehicle on incentives in the first quarter, up from $1,285 a year earlier.

By comparison, GM spent about $500 more per vehicle, while Ford spent about $50 more.

The Big 3 spent a combined average of $1,906 for each vehicle sold in April, up 5% from April 1999, according to Autodata Corp.

GM and DaimlerChrysler both boosted incentives heading into the Memorial Day weekend. Prior to the weekend, Chrysler had been trying to rein in its discount finance rates to protect profit this quarter. It told dealers it will add a new round of rebates this week.

DaimlerChrysler also advertised zero short-term interest rates on all new Chrysler cars in Southern California. GM, meanwhile, added a $500 rebate toward the purchase of some Buick, Pontiac, Oldsmobile and Chevrolet cars in the Midwest.

GM’s light-truck sales will be helped by demand for its redesigned Chevrolet Suburban and Tahoe and GMC Yukon, which weren’t widely available in May 1999. Those gains will be offset by declining car sales, as its Buick and Oldsmobile mid-size cars fail to generate demand despite incentives as high as $2,000 per vehicle.

DaimlerChrysler’s Chrysler, Dodge and Jeep brands are expected to have their biggest sales decline since May 1997. Analysts expect the auto maker’s shares to erode until its PT Cruiser small-car/truck hybrid arrives in dealerships in significant numbers, followed by redesigned minivans and mid-size cars in the third quarter.