Housing troubles put a dent in U.S. auto sales

DETROIT -- Automakers sold nearly 80,000 fewer cars and trucks last month than in February last year, a 6.3% drop. Housing and economic woes kept buyers at home, even as automakers stepped up incentives to try to rescue flagging sales.

A rebound is not yet in sight as the housing shakeout continues to reverberate through the auto industry. Markets where home prices have been hit hardest, such as California, are also where auto sales are taking a beating.

That makes it likely that incentives — including cut-rate financing and cash-back offers — will continue to spread. Domestic automakers General Motors, gmFord Motor fand Chrysler have been trying to wean consumers off incentives, which cut profit margins and depress the value of cars and trucks when buyers resell them. The automakers have cut sticker prices and made rebates smaller to get official vehicle prices more closely aligned with the actual price consumers pay.

Still, the appetite for deals is back up.

"Business was tough all month," says Mark LaNeve, General Motors' vice president of North American sales, service and marketing. "Although we did close strong at the end of the month. … Buyers came in looking for a deal."

In this tough market, incentives will likely keep rising, says Jessica Caldwell, an analyst at auto information site Edmunds.com.

Industrywide, incentives were up 8.4% compared with a year ago. After the sales report Monday, executives at GM, Ford and Toyota tmsaid they expect incentives to keep rising this year until sales begin to stabilize. They still predict that will happen in the second half of the year when, they hope, the economic stimulus package begins kicking in.

"A lot of the automakers said they were trying to decline incentive spending, but what we're seeing is them slowly creeping back up," says Caldwell. "For a lot of brands, because it's going to be a really tough year, if January and February are any indications, (incentives) are probably going to keep increasing."

In other sales news:

•Toyota, usually an industry stalwart, wasn't immune to the decline. Sales fell 2.8%, letting Ford Motor edge in front of Toyota in sales for the first time since April.

•Small cars were the only segment to post an increase during February, and it was hardly something to write home about. The segment was up less than 1%. Large cars posted the largest decline, down 29.2%.

•Honda hmc and Nissan nsany were the only large automakers with increases, and Honda managed to do it with a negligible increase in incentives compared with last year, up just $12 on average. Nissan's incentives were up nearly $400, according to Edmunds.com.

•Ford will cut second-quarter production by 10% compared with last year. The automaker has said it is working to better align production with demand.