Car Sales Wheeze After Long Climb -- WSJ

By Mike Colias and Christina Rogers Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 2, 2017).

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U.S. auto industry sales continued to slump in August amid mounting signs that American car buyers have become more fickle following a seven-year growth streak

While General Motors Co. and Toyota Motor Corp. notched relatively strong gains, fueled in part by heavier discounting, others reported lower results, with some citing lost sales tied to Hurricane Harvey.

U.S. light-vehicle sales in August fell 1.9% from a year earlier, according to Autodata Corp. The industry's annualized selling pace, a measure of how sales are tracking for the full year, was 16.14 million last month, below analysts' expectations and down from 17.22 million a year ago. The weaker performance comes despite last month having an extra selling day.

GM's August sales jumped 7.4% from a year earlier, totaling 275,552 vehicles, as the Detroit giant deepened discounts on many SUV models, aiming to make room on dealer lots for newer versions.

The nation's largest auto maker cleared out much of the excess inventory that has been worrying investors this year, with stocks on dealership lots falling to an 88-day supply, from 104 days in July.

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Ford Motor Co.'s sales slipped 2.1%, to 209,029 vehicles, as demand for SUVs cooled. Still, it reported a 15% surge in sales of pickup trucks, its biggest profit generator.

Fiat Chrysler Automobiles NV's August sales dropped 11%, to 172,773 vehicles, as five of its six brands reported declines. Sales for Jeep -- FCA's highest-volume brand -- fell 15%, while sales of its Ram pickups dropped 7%.

Shares of the Detroit auto makers rallied. GM and Ford shares were up 2.2% and 2.9%, respectively at Friday's close. FCA shares jumped 4.8% after Standard & Poor's revised its outlook for the stock to positive.

Strong auto sales have helped underpin the nation's economic recovery since the financial downturn, rising seven straight years to a record of more than 17.5 million vehicle sales in 2016. That streak is almost certain to end this year though, after the industry posted lower growth in each of the first eight months. August's seasonally adjusted annual selling pace was the slowest for the closely watched benchmark since October 2014.

Market watchers believe auto sales could get a lift in coming months as owners of vehicles lost to the flooding in Texas and Louisiana buy replacement cars. Between 500,000 and 1 million vehicles likely were totaled during the storm and subsequent flooding, according to Black Book, a research firm that compiles car valuations.

August results were mixed for Japanese brands. Toyota's sales rose 6.8%, to 227,625 vehicles, while Nissan Motor Co.'s sales tumbled 13%, to 108,326 vehicles. Honda Motor Co.'s sales dipped 2.4%, to 146,015.

The muted August results could lead to some especially sweet deals for car shoppers visiting dealership lots for Labor Day promotions in the coming week, typically one of the busiest selling periods for the car business.

Auto makers have been sitting on bloated inventories for months and are scrambling to purge their lots of current-year models to make way for fresher versions. The car companies are behind on the annual model changeover this year -- an unusually high 91% of vehicles sold in the first half of August were from model-year 2017, according to research firm J.D. Power.

The lag could pressure auto makers' profitability because later-model vehicles generally entail lower discounts and thus carry higher profit margins.

GM's incentive spending rose sharply in August as the company cleared out older crossover SUVs to make way for the launch of several redesigned models. GM's SUV sales jumped 47% compared with a year earlier, while Ford's fell 11%.

Crossover SUVs, which ride on car platforms and return better fuel economy than truck-based SUVs, have become a key battleground as car buyers migrate away from sedans. Auto makers "have gotten much more aggressive from an incentives and marketing standpoint" in SUVs, Nissan U.S. sale chief Judy Wheeler said in an interview.

Discounts have heated up as auto makers face declining sales in other categories.

A lull in Ford's new-model pipeline has left dealers with relatively stale crossover SUVs in their showrooms.

Toyota outsold Ford in August for the second straight month -- a rarity -- amid a sharp increase in SUV sales. Mark LaNeve, Ford's U.S. sales chief, said the car maker has new models coming, including a new full-size Expedition SUV and EcoSport small crossover.

Write to Mike Colias at Mike.Colias@wsj.com and Christina Rogers at christina.rogers@wsj.com

(END) Dow Jones Newswires

September 02, 2017 02:47 ET (06:47 GMT)