The largest auto makers in the US sparked concerns that years of high-flying demand are over.
The industry will start the year with a fourth consecutive monthly drop, with Ford Motor and Honda Motor reporting the steepest decreases in April. The six biggest auto makers missed analysts’ estimates.
The US market is plateauing, Mark LaNeve, Ford’s vice president of US marketing, sales and service, said. “In this kind of industry, there’s going to be these kinds of months.” Photo: Pau Barrena
Another month of weak sales raises the prospect car makers will need to boost discounts and cut production to address swelling supply on dealer lots – particularly as credit tightens. Manufacturers Ford and General Motors joined auto-parts and dealer stocks leading some of the S&P 500 Index’s biggest declines in Tuesday trading.
“It was a low-interest party, but lenders have pulled back,” Maryann Keller, an auto industry consultant in Stamford, Connecticut, said by phone. “They have made it more expensive for the borrower to get credit. Some people can’t get financed and for others it’s too expensive.”
Fiat Chrysler Automobiles NV’s New York-traded shares dropped 5 per cent near midday, while Ford fell 4 per cent and GM slid 3.2 per cent. BorgWarner and Delphi Automotive led auto-supplier shares lower, while retailers including AutoNation and car max also slumped.
The industry likely fell short of analysts’ projected annualised pace of US auto sales, adjusted for seasonal trends, of about 17.1 million, slower than 17.4 million a year earlier.
The US market is plateauing, Mark LaNeve, Ford’s vice president of US marketing, sales and service, said on a call with analysts and reporters.
“I’m not discouraged by the number,” he said. “In this kind of industry, there’s going to be these kinds of months.”
Industrywide deliveries have declined in each of the first three months this year and were down 1.5 per cent through March, according to researcher Autodata Corp. The market’s slump continuing into April reinforces estimates for the US auto market’s first annual contraction since 2009, the year GM and Chrysler reorganised in bankruptcy court.
GM has scheduled about 13 weeks of downtime at North American plants during the third quarter, chief financial officer Chuck Stevens told analysts last week. While the bulk of the idled production is related to retooling factories to make new or redesigned sport utility vehicles and pickups, the auto maker is also trimming output of the Corvette sports car at its plant in Kentucky.
Sales are declining even as auto makers have ratchet up discounts. Spending on incentives last month through April 16 reached a record for the month of $US3499, according to J.D. Power.
“Sales look soft,” David Whiston, an auto analyst at Morningstar, said by phone. “I told clients that 2016 would be the end of growth, and it looks like just that.”