Automakers got hit where it hurts in February, with U.S. sales of their most profitable vehicles — trucks, sport utilities and large sedans — plunging as consumers reacted to high gas prices and the possible recession. General Motors Corp. and Ford Motor Co. announced second-quarter production cuts in the face of the falling sales.
GM reported a sales decline of almost 13 percent for the month while Ford's sales slumped 7 percent, Chrysler's tumbled 14 percent and Toyota's fell 3 percent. It was expected to be a difficult month for automakers as consumer confidence continued to slide. Declines in home construction also have significantly weakened truck sales.
Mark LaNeve, GM's vice president for North American sales and marketing, said tightening automotive credit standards may also be hurting sales.
"On the edges of a difficult market, it's one of those things that makes it more difficult," LaNeve said.
If the February sales rate held steady for the full year, U.S. sales would be 15.4 million units in 2008, according to Autodata Corp. That's down from a rate of 16.6 million units last February.
Honda Motor Co. bucked the trend, posting a 5 percent increase in U.S. sales as booming sales of its small cars and crossovers picked up the slack from its slumping Ridgeline pickup and luxury sedans. The subcompact Honda Fit saw sales jump 62 percent. Honda's sales were up nearly 2 percent for the first two months of the year.
GM said its sales decline was led by a 19 percent drop in sales of trucks and SUVs. Sales of Chevrolet full-size pickups were down 29 percent for the month. Large sedans didn't fare much better; sales of the full-size Buick Lucerne were down 26 percent. GM's sales dropped 6 percent in the first two months of the year.
GM said the comparison with last February was a tough one, since retail sales hit a high mark for the year in February 2007. Still, the company responded to the downturn by cutting North American production by 5 percent in the second quarter to 1.08 million vehicles.
LaNeve said that while a weeklong strike at American Axle and Manufacturing Holdings Inc. has idled some GM plants, the company has enough inventory of trucks and SUVs to last at least 60 to 90 days.
"Right now it's not a threat to us doing business given our relatively healthy inventory situation," he said.
Toyota Motor Corp. said its car sales fell 4 percent while its truck sales were flat for the month. The aging Avalon full-size sedan was down 30 percent compared to last February. Toyota saw particular weakness in its luxury Lexus division, where sales of its flagship LS 460 sedan fell 25 percent for the month. Toyota's overall sales were down 2.5 percent for the year.
Mark Templin, the general manager of the Lexus division, said U.S. luxury sales fell in the first two months of 2008, but the company is still predicting that luxury sales will end the year flat compared to 2007.
This year is expected to be the slowest in a decade for the U.S. auto industry, but automakers are still predicting sales will pick up in the second half thanks to the federal stimulus package and pent-up demand. In the meantime it will be tough going, and the biggest casualties are the kinds of expensive vehicles automakers counted on for profits in the past.
"These segments could get tougher before they get better," said Randy Pflughaupt, vice president of marketing for Toyota's U.S. division.
Ford said sales of its crossovers were brisk in February, but buyers shunned its large sedans and SUVs. Combined sales of Ford's largest SUVs were down 22 percent in February. Ford's car sales dropped 9 percent while truck sales fell 5 percent. The automaker's sales decreased 5.5 percent for the first two months of the year.
Ford said it will cut shifts at factories in Chicago, Louisville, Ky., and Cleveland by this summer and reduce North American production by 10 percent in the second quarter to 730,000 vehicles. The Chicago factory makes the Ford Taurus and Mercury Sable sedans and Taurus X crossover vehicle, while the Louisville Assembly plant makes the Ford Explorer and Mercury Mountaineer sport utility vehicles. The Cleveland plant makes engines.
Ford's top U.S. sales analyst, George Pipas, said consumers have been moving away from larger sedans such as the Taurus for the last two years. Taurus sales fell 26 percent in February, while sales of the compact Focus rose 11 percent.
"It's not just a Ford thing," Pipas said. "All the action in the passenger car market has been in the small-size category and the mid-size category."
Chrysler LLC said its car sales rose 9 percent, largely on the strength of small cars such as the Dodge Caliber subcompact, which was up 10 percent for the month, and the mid-size Dodge Avenger, which rose 60 percent. But its truck sales fell 22 percent. Chrysler's newly redesigned Dodge Caravan minivan was down a disappointing 32 percent for the month.
Nissan Motor Co. said its sales rose 1 percent thanks to a strong showing by its Versa subcompact. Like other automakers, Nissan also reported strong crossover sales, with its recently redesigned Murano up 6 percent. Ford's Edge crossover gained 46 percent for the month, while GM's GMC Acadia rose 33 percent.
Automakers responded to the weakness in February by increasing incentive spending, a trend that's expected to continue through the summer, according to Jesse Toprak, chief industry analyst for the auto information site Edmunds.com. The average incentive per vehicle was $2,435 in February, up 8 percent from the year before. Toprak said European automakers were particularly aggressive with incentives, helped by the strength of the euro.
The Associated Press reports unadjusted figures, calculating the percentage change in the total number of vehicles sold in one month compared with the same month a year earlier. Some automakers report percentages adjusted for sales days. There were 25 sales days last month and 24 in February 2007.
GM shares fell 8 cents to $23.20 while Ford shares lost 35 cents, or 5.4 percent, to $6.18 and Toyota's U.S. shares gained 53 cents to $109.08.
On the Net:
Chrysler LLC: http://www.chrysler.com
Ford Motor Co.: http://www.ford.com
General Motors Corp.: http://www.gm.com
Nissan Motor Co.: http://www.nissandriven.com
Toyota Motor Corp.: http://www.toyota.com