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U.S. automakers brace for drop in July sales

U.S. automakers are expected to register a dramatic decline in July vehicle sales compared with a year ago when heavy discounts stoked near-record sales.
/ Source: The Associated Press

U.S. automakers are expected to register a dramatic decline in July vehicle sales compared with a year ago when heavy discounts stoked near-record sales. At the same time, high gas prices are driving many buyers toward more fuel-efficient models, an area where Asian manufacturers still dominate.

New vehicle sales are expected to come in at about 1.54 million units, a 15 percent decrease from July 2005, according to estimates by the vehicle research site

Automakers release their July sales results on Tuesday.

Michael Maroone, president and chief operating officer of AutoNation Inc., the nation's largest auto retailer, said July should be stronger than June, when 1.5 million vehicles were sold in the United States.

"I think in June there was a number of customers waiting for the next incentive program," he said.

Summer incentives have paled in comparison to last year, when the domestic automakers offered all customers the chance to buy vehicles at the discounted employee price. With General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group all running the programs, 1.8 million vehicles were sold last July. That made for a seasonally adjusted annual sales rate of 20.8 million units — the highest since October 2001.

Some people probably will continue to hold out for discounts, which they are used to seeing in the summer, President Jeremy Anwyl said.

"It's a game of chicken between the deal seekers and the car companies," he said.

Consumers looking for blowout deals this year for the most part have been disappointed. Only Chrysler is running the employee discount promotion, which it began again at the end of June, offering 10 percent off most 2006 models, along with three-year, zero percent financing on most 2006 models.

Ford has been offering five-year interest-free financing on most models, along with a prepaid debit card that can be used to purchase up to $1,000 worth of gas. The promotion ends Monday.

GM has been trying hard to wean itself from incentives, but has not eliminated them completely. It offered zero percent financing for up to six years on most of its models for one week ending July 5 and recently began offering discounts and no-interest financing on specific models until Sept. 5.

This year's incentives are helping move vehicles off dealer lots, though not anywhere near the way last year's did, Maroone said. The short-term GM program was most effective and "certainly did its job of waking up the market," he added.

Meanwhile, slower sales of trucks and sport utility vehicles are leaving GM, Ford and Chrysler particularly vulnerable. The domestic companies are dependent on those types of vehicles for most of their sales.

But while those companies can be expected to blame gas prices for the shift, AutoNation's chairman and chief executive, Mike Jackson, argued that product innovation, not fuel costs, are pushing people toward crossovers instead of SUVs.

"A crossover is a superior solution for most consumers. It's more comfortable, the driving dynamics are better, it's smoother, it's quieter, and it's more fuel efficient." Jackson said. "That shift would be happening whether you had $2 a gallon or $3 a gallon."

Ford, GM and Chrysler all have new crossovers hitting showrooms later this year.