June 1 (Bloomberg) -- Chrysler LLC, idling plants and shutting dealerships in bankruptcy, probably helped shrink the U.S. auto market by 35 percent in May as the industry endured its worst start to a year since at least 1976.

The seasonally adjusted sales rate tumbled to 9.2 million last month from 14.2 million a year earlier, based on 7 analysts surveyed by Bloomberg. Chrysler may have fallen 51 percent and General Motors Corp., which filed for bankruptcy today, may have fallen 37 percent, according to 5 analysts.

May sales at that rate would mark a fifth straight month at fewer than 10 million units, the deepest slump in 33 years of Bloomberg data. U.S. joblessness at the highest since 1983, Chrysler’s Chapter 11 case and GM’s slide toward court protection all likely helped keep buyers out of showrooms.

“It’s still a rough road out there,” said Jeff Schuster, an automotive sales analyst with J.D. Power & Associates in Troy, Michigan. “There’re still a lot of issues with the economy and a lot of uncertainty in consumers’ minds.”

GM, the biggest U.S. automaker, and No. 3 Chrysler began receiving emergency federal loans in December while they worked to restructure outside of court.

Chrysler filed for bankruptcy on April 30 and won court approval late yesterday to sell most of its business to a group led by Italy’s Fiat SpA. Detroit-based GM sought Chapter 11 protection today, ahead of reporting May results tomorrow with other automakers that sell cars in the U.S.

‘Dust Settles’

The industry sales rate has been little changed since January “probably because of uncertainty caused by Chrysler and GM bankruptcies,” said Jesse Toprak, director of industry analysis for auto-research firm Edmunds.com in Santa Monica, California. “After the dust settles, we’ll probably see sales improving to above a 10 million rate.”

While that rate would be higher than in the first five months of 2009, it still would be less than 2008’s 13.2 million U.S. sales and the average of 16.8 million this decade through 2007.

Ford Motor Co., the only U.S. automaker not in bankruptcy, probably posted a 29 percent drop in sales, helping it increase market share, according to 5 analysts.

A late-month sales jump may push the industry rate to almost 10 million units or even more, said George Pipas, the sales analyst for Dearborn, Michigan-based Ford.

‘Things Have Changed’

“In the last week, things have changed,” he said. “We expect to see a sales rate that is higher than we’ve seen in the last four months.”

Nissan Motor Co. may have fared best among Japanese automakers, sliding 37 percent, compared with 40 percent for Toyota Motor Corp. and 38 percent for Honda Motor Co., according to the average of 3 analysts surveyed by Bloomberg.

Hyundai Motor Corp., South Korea’s largest automaker, may have dropped 15 percent, according to Edmunds.com. Incentive spending and Hyundai’s image as a value brand probably helped blunt the decline, Toprak said.

Buoyed by incentives, Chrysler outperformed the industry through May 18, according to a J.D. Power report that cited dealer sales data. By month’s end, that pace proved unsustainable, Toprak said.

“We thought the fire sale at Chrysler after the bankruptcy filing would go better,” he said. “There was an uptick in sales and then it faded away.”

Factories, Dealers

Chrysler was trying to boost demand against a backdrop of factory and dealership closings. The Auburn Hills, Michigan- based automaker halted most assembly work starting May 4 and cut ties 10 days later with 789 dealers, or about 25 percent of the total. Those on the cut list will be gone by June 9.

“Good signs” in the economy may help revive industrywide sales in coming months, J.D. Power’s Schuster said.

Consumer confidence rose the most in six years in May, as measured by the sentiment index of the New York-based Conference Board research group. Fewer Americans filed claims for unemployment benefits in the week ended May 23, according to Labor Department figures released May 28.

Automakers are still waiting to see those improvements translate into brisker traffic at dealer lots, said John Wolkonowicz, an IHS Global Insight Inc. analyst in Lexington, Massachusetts.

“Consumer confidence is very much a leading indicator and it will take several months for car sales to get in line with that,” said Wolkonowicz, whose firm projects industry sales this year of 9.5 million. That would be the fewest since 1964, according to Automotive News’s 100-Year Almanac. “There’s still a long way to go before we’re out of this.”

Ford rose 38 cents, or 6.6 percent, to $6.13 at 4 p.m. in New York Stock Exchange composite trading. The shares have more than doubled this year.

Ford’s 7.45 percent bonds due in July 2031 gained 0.75 cent to 59 cents on the dollar, yielding 13.2 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. That was the highest closing price since June 26, based on Bloomberg data.

     The following table provides estimates for car and light-
truck sales in the U.S. Estimates for companies are a percentage
change from May 2008. Forecasts for the seasonally adjusted
annual rate, or SAAR, are in millions of vehicles.
     The SAAR average is based on forecasts from 7 analysts. The
estimates or based on daily selling rates. May had 26 selling
days, one fewer than last year.

                         GM        Ford      Chrysler       SAAR

Joseph Barker            N/A       N/A       N/A            9.4
(CSM Worldwide)
Christopher Ceraso       -32%      -27%      -48%           9.45
(Credit Suisse)
Gary Dilts               N/A       N/A       N/A            9.4
(J.D. Power)
Rod Lache                -40%      -27%      -45%           9.1
(Deutsche Bank)
John Sousanis            -37%      -30%      -50%           9.2
(Ward’s)
Jesse Toprak             -35%      -26%      -52%           9.3
(Edmunds)
John Wolkonowicz         -42%      -35%      -59%           8.8
(Global Insight)
Analysts’ average        -37%      -29%      -51%           9.2

To contact the reporters on this story: Alex Ortolani in Southfield, Michigan, at aortolani1@bloomberg.net; Doron Levin in Southfield, Michigan, at dlevin5@bloomberg.net

Last Updated: June 1, 2009 16:21 EDT