Auto Sales Stall With 500,000 Cut From 2013 U.S. Outlook

Auto Sales Stall With 500,000 Cut From 2013 U.S. Outlook
Even with the slowdown, U.S. auto sales are on pace for the best annual total since 2007. Photographer: Tim Rue/Bloomberg

The pace of U.S. auto sales probably stalled for a second straight month in June as the labor market stumbled and confidence waned, leading analysts at Citigroup Inc. and Deutsche Bank AG to lower estimates for demand in 2013.

Light-vehicle sales in June, set for release tomorrow, may have run at a 13.8 million seasonally adjusted annualized rate, the average estimate of 15 analysts surveyed by Bloomberg. That average estimate matches May’s rate, the year’s first month to dip below 14 million, and trails the 14.5 million pace in the first four months of 2012.

Even with the slowdown, U.S. auto sales are on pace for the best annual total since 2007. With sales in Europe falling a fifth-straight year and China’s market slowing, automakers such as Ford Motor Co. are counting on demand to warrant more production in North America to offset losses in other regions.

“We’re talking about less strength than earlier in the year,” Emmanuel Rosner, a New York-based analyst for Credit Agricole Securities Inc.’s CLSA, said in a telephone interview. “The macro data that correlates the best with U.S. auto sales is consumer confidence and employment figures. In both cases, there’s been some deceleration.”

Ford, Chrysler Group LLC and affiliates Hyundai Motor Co. and Kia Motors Corp. probably will report smaller June sales gains than they recorded this year through May, according to analysts’ estimates. Citigroup’s Itay Michaeli and Deutsche Bank’s Rod Lache each cut their 2013 industry sales estimates by 500,000 cars and light trucks last month as U.S. job gains slowed and consumer confidence weakened.

‘Additional Headwinds’

Michaeli lowered his outlook for 2013 to 14.5 million sales, from 15 million. Lache cut his 2013 estimate to 14.2 million, from 14.7 million.

“We see potential for additional headwinds from the crisis in Europe, and headwinds from U.S. federal budget cuts which may take effect in January,” Lache wrote in a June 25 report.

Confidence among U.S. consumers dropped for a fourth month, the Conference Board’s index showed June 26. The private research group’s measure fell to 62 for June, the lowest since January. Employers added 69,000 workers in May, the fewest in a year, and the jobless rate rose to 8.2 percent.

A 20 percent rise in June light-vehicle deliveries to 1.27 million, the average estimate of 10 analysts, is skewed by comparisons with year-earlier vehicle shortages for Toyota Motor Corp. and Honda Motor Co., which lost production after Japan’s March 2011 earthquake and tsunami. The June 2011 sales rate was 11.6 million, according to researcher Autodata Corp.

Dynamic Duo

With a better supply of cars and light trucks and the easier year-earlier comparison, Toyota may lead the industry with a 66 percent gain in June sales, followed by Honda’s 51 percent increase, the average estimates of eight analysts.

Toyota added 1.2 percentage points of share through May while Honda lost 0.3 percentage points, according to Woodcliff Lake, New Jersey-based Autodata. The duo may end the year with a combined U.S. market-share gain of 1.4 percentage points, according to a Bloomberg survey of analysts in January.

“I’m surprised by the speed of getting inventory levels up,” Don Mushin, general manager of Toyota of Hollywood in California, said in a phone interview. “We went from a 20-day supply of cars to about a 45-day supply of cars. They’ve ramped up real strong.”

Chrysler probably will lead U.S. automakers with an 18 percent sales increase in June, the average of 10 estimates. Chrysler deliveries climbed 33 percent this year through May, according to Autodata.

GM Estimates

Dealers took first deliveries in June of the Dodge Dart compact sedan, which Chief Executive Officer Sergio Marchionne has called the most important new model introduction to the company since Fiat SpA took control in 2009.

General Motors Co.’s June deliveries probably rose 7.6 percent, the average of 11 analysts’ estimates. The Detroit-based automaker’s U.S. market share through May slipped 2 percentage points from a year earlier to 17.8 percent, ahead of Ford’s 15.6 percent and Toyota’s 14.5 percent.

GM dealers such as Lewis Chevrolet-Cadillac in Garden City, Kansas, benefited last year when the Japan tsunami and floods in Thailand disrupted auto production and sapped supply of Tokyo-based Honda’s best-selling models.

“With a lack of supply for Japanese cars, it made a lot of people look at other options,” Mike Shook, the dealership’s general manager, said in a phone interview. After filling the gap for buyers who couldn’t find Civics at the crosstown Honda dealership, the dealership’s supply of GM’s Chevrolet Cruze ran short until recently, he said.

Inventory Rises

GM’s inventory of the Cruze rose to 80 days’ supply at the end of May, Chris Ceraso, a New York-based analyst for Credit Suisse, wrote in a June 12 report. The automaker’s lineup may have been “overstocked” by about 88,000 cars and trucks by the end of June, said Ceraso, who estimates that GM will trim its North American production in the third quarter by 4 percent from a year earlier, to 711,000 units.

Ford sees industry sales in June being “consistent” with May, Mark Fields, president of the Americas, told reporters on June 26. The Dearborn, Michigan-based automaker will adjust production if necessary after seeing consumer confidence “come off its highs,” he said.

Ford sales probably gained 3.7 percent, the average estimate of 11 analysts. The automaker increased deliveries by 6.5 percent through year’s first five months. Ford said in a filing last week that it expects to report “good results” for North America in the second quarter while pretax losses may have tripled overseas from $190 million in the first quarter.

Ford’s inventory levels of smaller cars are closer to Japan-based automakers than GM’s. The company had a 32-day supply of Focus compacts at the end of May, while Toyota had 26 days of Corolla cars in stock and Honda had 44 days of Civics.

Yen’s Strength

“When you look at our lots, they’re not full; they’re not even half-full,” John Hawkins, owner of Metro Honda in Montclair, California, said in a phone interview. Honda’s supply of some models is low while the automaker is reluctant to import models from Japan because of the strong yen, he said.

As the yen rises versus the dollar, Japan-built vehicles become more expensive to sell in the U.S. It took 111.75 yen to buy one U.S. dollar at the end of 2007 and only 79.79 on June 29.

Korea’s Hyundai and Kia may combine to sell 9.8 percent more vehicles in June than a year earlier, the average of six analysts’ estimates. The Seoul-based automakers combined to increase deliveries by 14 percent this year through May, according to Autodata.

Nissan, Volkswagen

Nissan Motor Co., which began production in May of its revamped Altima sedan, may report a 21 percent gain in deliveries for the month, the average of eight estimates.

Volkswagen AG, on pace to exceed its target for selling more than 500,000 vehicles in the U.S. this year, may have increased combined sales of its Volkswagen and Audi brand vehicles by 28 percent in June, the average of four analysts’ estimates.

The following table shows estimates for car and light-truck sales in the U.S. Estimates for companies are a percentage change from June 2011. Forecasts for the seasonally adjusted annualized rate, or SAAR, are in millions of light vehicles.

May had 27 selling days, one more than the year-earlier period.

GM Ford Chrysler SAAR

Rod Lache 7% 1.4% 19% 13.8 (Deutsche Bank) Peter Nesvold 5.2% 4.4% 19% 13.8 (Jefferies) Patrick Archambault 6.2% 2% 17% 13.8 (Goldman Sachs) Joseph Spak 7.7% 5.9% NA 13.9 (RBC) Brian Johnson 6.4% 7.1% 18% 13.8 (Barclays) Emmanuel Rosner 9.1% 2.9% 17% 13.8 (CLSA) Chris Ceraso 8.2% 2.4% 14% 13.7 (Credit Suisse) Adam Jonas NA NA NA 14.0 (Morgan Stanley) John Sousanis 12% 8% 18% 14.0 (Ward’s) Christopher Hopson NA NA NA 13.8 (IHS Automotive) Jeff Schuster NA NA NA 13.9 (LMC Automotive) Alan Baum NA NA NA 14.0 (Baum & Associates) Jessica Caldwell 8.7% 4.4% 19% 13.9 ( Jesse Toprak 6% 0.3% 16% 13.6 ( Alec Gutierrez 7.3% 1.4% 20% 13.9 (Kelley Blue Book) Average 7.6% 3.7% 18% 13.8 The following table shows selling-day adjusted estimates for company car and light-truck sales as a percentage change from June 2011.

GM Ford Chrysler

Peter Nesvold 1.3% 0.5% 15% (Jefferies) Patrick Archambault 2.3% -1.8% NA (Goldman Sachs) Joseph Spak 4% 2% NA (RBC) Brian Johnson 2.5% 3.1% 14% (Barclays) Emmanuel Rosner 5.1% -0.9% 13% (CLSA) Chris Ceraso 4% 0% 11% (Credit Suisse)

Average 3.2% 0.3% 14%

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