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Gloom may seep into auto market

Dealers are concerned the recent news of a sluggish economy may slow what had been strong auto sales.

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By Tom Krisher
Associated Press
DETROIT -- The raft of gloomy economic news may be starting to hurt U.S. auto sales.
Industry analysts and dealers said this week that sales during the first half of July slowed a bit from the robust pace in June. But they still were expected to be better than July of 2011.
"It's a bit slower than where we want it to be," said Inder Dosanjh, owner of several General Motors dealerships in the San Francisco-Bay area.
Dealers such as Dosanjh may be wondering if car buyers, who've largely ignored sobering economic headlines, are finally getting discouraged. A widely followed reading on consumer confidence has fallen for four straight months. Federal Reserve Chairman Ben Bernanke acknowledged this week that the economy has weakened.
For the first half of the year, sales of cars and trucks ran at an annual rate of 14.3 million, the best pace in 5 years. Car buyers bought everything from compacts to big pickups, making the auto industry a bright spot in the economy. The only hiccup came in May, when sales slipped to a 13.8 million annual rate as the stock market plunged. Buyers returned in June to drive sales back up to a 14.1 million rate.
Jeff Schuster was expecting sales to tail off in the early part of July, partly because promotions leading up to Independence Day may have pulled sales ahead into June. The senior vice president of forecasting at the LMC Automotive consulting firm in Troy, Mich. predicts July sales likely will come in at an annual rate below 13.8 million.
"With the weaker consumer confidence, the auto industry could be in for a roller-coaster second half, but it isn't time to sound the alarm yet," said Schuster, who is sticking with his forecast of 14.5 million sales for the full year.
If Schuster's July forecast holds, sales would eclipse the 12.2 million rate of last July. Sales have come a long way from the doldrums of 2009, when only 10.4 million cars and trucks sold during the financial crisis. The recent peak for sales was 2005, at 17 million.
Dealers surveyed by Citi Investment Research analyst Itay Michaeli also reported a slow start to July. But Michaeli noted that auto sales normally are stronger in the final two weeks of a month as discounts kick in and dealers try to make monthly goals.
Not all analysts are predicting a big sales drop for July, though. predicts an annual rate of 14 million, and is at 14.1 million. Ward's analyst John Sousanis said he expects factors that fueled strong sales during the first half to continue. He said owners of car fleets, like governments and rental car companies, need to replace aging vehicles the same way individual owners do.
Some analysts were also pessimistic just before June sales figures were released, with many predicting a drop to below a 14 million annual rate. They believed worries about jobs and incomes had caused some buyers to back away.
Automakers ended up selling nearly 1.3 million cars and trucks last month, up 22 percent from June of last year. Falling gas prices, cheaper loans and new models enticed buyers. A revived housing market lifted sales of pickup trucks, and it turned out there were plenty of sales to people who needed to replace cars they bought cars in the middle of the last decade. Ford Motor Co. sales rose 7 percent, while sales at General Motors Co. rose 16 percent.
Gains were even stronger at Chrysler and Volkswagen.
Strong sales from April through June helped AutoNation, the country's largest dealership chain, to boost its net income by 9.3 percent in the second quarter. CEO Mike Jackson said Thursday that he still expects new car and truck sales to reach the mid-14 million level for all of 2012, mainly because there are more people who have to replace aging vehicles. The average age of a vehicle on U.S. roads is approaching 11 years, according to the Polk research firm.
July's sales at Dosanjh's dealerships still should be 15 percent to 20 percent better than the same month last year, he said, holding out hope that they get back to June's levels by the end of the month.
Story tags » Automotive



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