U.S. auto sales may have hit bottom, some experts say
DETROIT -- There are early signs auto sales may have hit bottom in the first quarter, industry leaders say, and even could recover in the second half if the government encourages car buying.
But experts such as Ford Motor CEO Alan Mulally also warn that optimism could turn to panic if major auto suppliers collapse.
"Clearly, the health of the supply base is the most critical issue as the government helps GM and Chrysler restructure," Mulally said in a conference call last week on Ford's first-quarter earnings.
First-quarter sales this year were off 37.6%, vs. the period in 2008, and April may not be better. But the fact that sales have bounced around an annualized rate of about 9 million cars without falling through may signal a low point.
"Industry sales are starting to show signs of stability — albeit at levels near 30-year lows," says Gary Dilts, senior vice president of global automotive operations at J.D. Power and Associates. New car sales were down 33% for the first half of April, Power says, but that's no worse than the first quarter.
Other analysts predicting the market may have hit bottom include forecasters for auto site Edmunds.com, which says the industry is slowly picking up momentum. Citigroup analyst Itay Michaeli sees sales increasing as the "tug-of-war between rising replacement needs and job concerns" creates pent-up demand. JPMorgan analyst Himanshu Patel says the stock market is starting to reflect a view that auto sales have hit bottom.
Mike Jackson, CEO of dealership chain AutoNation, says the credit markets are thawing a bit, and more loan availability will help sales recover.
"The downward spiral has broken," he says. "We already have the (showroom) traffic. Once you normalize credit, sales will come back up."
Still, he says sales won't grow right away, since consumers still worry about jobs and the economy.
Mulally and Jackson said they believe passage of a federal stimulus program, such as the cash-for-clunkers bill sponsored by Rep. Betty Sutton, D-Ohio, could boost sales in the second half of the year. Her bill would give buyers a $5,000 to $7,000 rebate if they trade in a car older than seven years and buy a new fuel-efficient vehicle.
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