In May, Auto Buyers Continued to Idle

The shift away from trucks and SUVs sped up and more buyers stayed home, leading to a 10.7% drop in light-vehicle sales for May

Auto sales dropped again in May as more and more consumers opted to stay out of the market.

Total U.S. light-vehicle sales were about 1.4 million for the month—10.7% lower than sales in May a year earlier. Year-to-date sales through the end of the month were down 8.4%, to about 6.2 million, according to AutoData in Woodcliff Lake, N.J.

"May was a watershed month," said Jim Farley, group vice-president for marketing and communications at Ford (F). "We as an industry are catching up with the breathtaking choices customers are now making," he said.

Actually, May was more like a woodshed month. What's "breathtaking" is the speed with which customers have turned their backs on large pickup and SUVs and embraced more fuel-efficient small cars and crossovers.

Consider that in May four top-selling Japanese passenger cars—the Toyota Carolla and Camry and the Honda Civic and Accord—each outsold Ford's F-series trucks. The F-series has been the best-selling vehicle, car or truck, in the U.S. market for 26 years. In all that time, there have been only a couple of months when another vehicle outsold the big Ford pickup, and then only with the help of generous incentives. And the F-series has never fallen so far down the list of top sellers, behind Japanese brands. Based on retail sales and without counting fleet sales, even Ford's own Focus small car outsold the F-series last month. No passenger car has outsold the F-series for a full year since 1981.

Coming to a Full Stop?

That shift is bad enough, especially for Detroit's Big Three automakers, whose lineups are tilted heavily toward pickups and SUVs. What's worse isn't so much that customers are buying more fuel-efficient vehicles. It's that they're not buying anything.

Overall, sales for Ford Motor were down 15.8% in May, to 217,268 vehicles. General Motors (GM) sales plunged 27.5%, to 268,892, at least in part because of work stoppages that cut into production. Chrysler total sales dropped 25.4%, to 148,747. The company said its retail sales were down 19% for the month, not counting a 40% reduction in fleet sales.

Japanese import brands did better, thanks to more fuel-efficient cars. Nevertheless, sales slipped 4.3% for the month, to 257,404, for Toyota (TM), which also includes Lexus and Scion.

Of the six biggest automakers in the U.S. market, only Honda (HMC) and Nissan (NSANY) posted increases. American Honda, including Honda and Acura, climbed 15.6%, to 167,997. Nissan, including Nissan Division and Infiniti, rose 8.4%, to 100,874.

A Big Letdown in Pickups

"There are two things going on," said Mark LaNeve, GM vice-president for North America vehicle sales, service, and marketing. "The shift is pretty dramatic from trucks to cars and crossovers. But it's also in an industry that's down a million and a half units," he said in a conference call with auto analysts and reporters.

In January, 2008, sales fell 4.3% from the year-earlier month; in February, they were down 6.3%; in March, down 12%; and in April, down 6.7% from the year-ago month.

"In the truck segment, you see that in the pickup market," LaNeve said. "They're very durable, very few of them are leased, so the customer doesn't have to come back (at the end of a lease). People can sit and wait until housing improves or until their job security improves, and a lot of people are doing that," he said.

That is beginning to sound more and more like wishful thinking. The question is, will they ever come back? It doesn't seem likely, hence both GM's (, 6/3/08) and Ford's (, 5/22/08) recent announcements to cut truck and SUV production.

Worst Results in 10 Years

Overall, U.S. auto sales were about 16.1 million in 2007, down 2.5%. As monthly sales have fallen this year and automakers have cut their production forecasts, full-year forecasts for 2008 have started falling below 15 million, the worst in more than a decade.

For the total U.S. market, passenger car sales were up 2.4% in May vs. the year-ago month but light-truck sales were down 23.6%, AutoData said. That truck number includes crossovers, so sales of traditional pickups and SUVs are down even more.

Ford, for instance, said sales of its SUVs were off 44.4% for the month. Automakers said this shift has been happening since the end of 2004, when gas prices first started to increase, but has accelerated in the past 90 days.

That's how the small Focus ended up outselling the full-size Ford F-150 pickup (, 4/19/06). "It's a sign of the times," Farley said in a conference call. "It's significant, but it's not surprising. It's never happened, but we've never seen $4.20-a-gallon gas, either," he said.

Plant Closings

At Ford, Farley said that said small and midsize cars together today account for about 47% of U.S. sales. In February, that number was 34%, he said. "That 13% shift represents about 1.5 million customers…That's worth probably six assembly plants for the industry," Farley said.

Earlier in the day, GM announced it would close four plants and is conducting a "strategic review" of the Hummer brand. Ford and Chrysler have also made production cuts.

The faster shift to cars and from trucks is "the most dramatic shift in two or three decades," Farley said. "We're inclined to believe this is permanent. The only uncertainty is how far it will go from here," he said.

Editor's note: An earlier version of this story should have pointed out that there have been a couple of months during the past 26 years when Ford's F-series trucks were outsold by other vehicles.

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