The monthly sales reports released by the world's automakers Wednesday carried a double dose of bad news for the U.S.
Trouble in the housing market has spread to dealer showrooms, with worrying implications for the broader economy, and Detroit is no longer the carmaker of choice for the majority of Americans.
In July, import brands grabbed a majority share of the U.S. market for the first time as sales by the Big Three nosedived. Sales of foreign models were down too, off 5% from July 2006, but the falloff for General Motors Corp., Ford Motor Co. and Chrysler Group was much bigger -- 19%.
Total car and light truck sales in the U.S. fell 12.3%, according to data tracking firm AutoData Corp.
"Housing sales are in the tank, and now we're seeing the same in auto sales," said Erich Merkle, an analyst with the consulting firm IRN Inc. "What else is there? You can't support an economy on groceries and gasoline."
For Detroit, the foreigners' achievement -- their cars accounted for almost 52% of July sales -- was a long time coming, though the milestone might not be very meaningful in an industry that is increasingly globalized.
And the "import" tag fits less and less these days. For example, more than 80% of the 900,000 vehicles Honda Motor Co. has sold in the United States this year were made in the U.S. or Canada.
"All of the major manufacturers are operating across the globe now," said David Cole, director of the Center for Automotive Research in Ann Arbor, Mich. "While GM has lost market share in the United States, they've dramatically expanded their market share in other parts of the world."
Last month's sales drop was the biggest for U.S. carmakers since July 2006, when the decline was 17%, according to Santa Monica-based Edmunds.com. That month's results were competing with gangbuster sales in July 2005 that had been stimulated by "employee discount" financing offers. Sales fell almost 14% in October 2005 as gas prices spiked in the wake of hurricanes Katrina and Wilma.
There were only scattered pockets of good news last month. Among big automakers, only Nissan managed to post a gain, at 1.7%. Lexus, BMW, Land Rover and Audi also reported increases.
The slump in the housing market hurts car companies by putting a crimp in the sales of pickup trucks purchased by construction workers and companies, analyst Jesse Toprak of Edmunds.com said. Sales of the Ford F-Series and Chevy Silverado pickups, the two top-selling vehicles in America, fell 18% and 29%, respectively, last month.
What's more, falling home prices and a slowdown in refinancing and home-equity lending dampened overall consumer appetite for car shopping, even though consumer confidence in June was at a six-year high, according to a report Tuesday from the Conference Board.
"If I feel good about the economy, I may go out and buy a new DVD player," Toprak said. "But I may not feel good enough to go out and buy a $40,000 truck."
High gasoline prices are also hurting automakers, depressing sales of gas-hungry pickups and sport utility vehicles, which the U.S. companies rely on for the bulk of their sales.
In addition, Ford and GM have been intentionally cutting back on low-profit sales to corporate and rental fleets. Ford said sales to rental companies were down 57% in July, although it noted that sales to retail customers were down 17%.
Ford, which suffered an overall sales decline of 20% according to AutoData, was displaced by Toyota Motor Corp. as No. 2 in U.S. sales. That has happened five times in recent months, but Toprak said Toyota might have now permanently surpassed Ford. Like GM and Chrysler, Ford is closing plants and cutting production in an effort to regain financial stability.
The sales report came just after Ford and GM reported surprisingly strong financial results for the second quarter, which ended June 30. Perhaps with the July numbers in mind, both automakers warned that the second half of the year would be challenging.
Consumers may benefit from the automakers' summer swoon, which could lead to higher incentives on 2007 models from now through October, Toprak said. "We should be seeing a buyers' market."
For Detroit, the loss of top billing in July was a fall from a lofty perch. Fifty years ago, U.S. companies made almost every car sold in America.
In 1955, with Japan and Germany still rebuilding their war-ravaged economies, the U.S. companies' vision of automotive excellence -- tail fins and powerful V-8 engines -- ruled the marketplace.
That dominance faded as imports such as the Volkswagen Beetle became a familiar sight on U.S. streets. The shift accelerated in the 1970s, when the first round of oil price shocks suddenly made Japanese cars, with their edge in quality and economy, smart buys for many Americans who previously wouldn't have considered an import.
Import restrictions imposed in the early 1980s only delayed the trend. Toyota, Honda and Nissan -- dubbed the Japanese Big Three -- began building cars and trucks in the United States, and now these so-called transplants produce almost 27% of the cars sold in the U.S.
The American companies enjoyed a brief comeback when comparatively low gas prices lured consumers to the modern version of Detroit heavy metal: SUVs. But a return to high gas prices a few years later gave the edge back to the Japanese, with their reputation for fuel economy and their lead in bringing gas-sipping hybrids to market.
And now a new competitor looms across the Pacific.
"The Chinese are going to send cars over here, and we're overestimating how long it will take them to make a quality product," said Peter Morici, an international trade expert at the University of Maryland.
The Japanese and then the Koreans needed years to learn how to make cars good enough to grab a significant share of the American market, he said.
"It's not going to take the Chinese that long."
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*--* July sales % change YTD (In thousands from market of units) July '06 share GM 312.6 -22.4% 23.0% Toyota 224.1 -7.3 16.3 Ford 179.2 -20.0 15.3 Honda 141.0 -7.1 9.5 Chrysler 137.7 -8.4 13.1 Nissan 87.9 +1.7 6.5 Hyundai 43.5 -7.8 2.9 Kia 26.7 +1.0 1.9 Mazda 25.9 -0.4 1.9 BMW 24.3 +21.0 1.8