DETROIT (Reuters) - The pace of U.S. car and light truck sales slowed in May for the third month in a row despite steep discounts, but investors bid up shares of General Motors Co (GM.N) and Ford Motor Co (F.N) after executives outlined plans to cut inventories.
Automakers reported sales fell 1 percent from a year ago. This brought the annualized sales pace down to 16.66 million cars and light trucks from 17.17 million vehicles a year ago, according to figures compiled by Motor Intelligence. May is the third straight month that the sales pace has declined from a year earlier.
GM and Ford executives expressed hope that demand for new cars and trucks will stabilize in the second half of 2017, and said recent high levels of unsold cars will decline. Yet analysts warned that carmakers may have to continue heavy discounts or slash production due to issues ranging from rising interest rates to a glut of used cars.
Ford shares closed up 2.6 percent at $11.41. GM shares closed 1.5 percent higher at $34.43. Both stocks remained lower for the year to date. Ford led U.S. sales gains in May. GM, Fiat Chrysler Automobiles (FCHA.MI)(FCAU.N) and Toyota Motor Corp (7203.T) posted modest declines.
“Underlying economic conditions are still positive,” said Ford U.S. sales vice president Mark LaNeve, citing low interest rates and gasoline prices and high consumer confidence.
Ford said it has trimmed its inventory of unsold vehicles to 59 days, which the industry considers normal.
GM’s supply was 101 days, but the automaker said that largely represented pickup trucks built to carry dealers through extended retooling shutdowns later this year ahead of the launch of a new generation of Chevrolet Silverados and GMC Sierra trucks.
Total factory downtime related to these model changes would cut 100,000 vehicles from inventory during the second half, GM said in a statement. It also reiterated a promise that by the end of the year, it would return inventories to their levels at the end of 2016.
Ford, bolstered by heavy sales to fleet customers, surpassed GM in U.S. sales in May. Ford sales rose 2.2 percent from a year ago to 241,126 units. GM sales dropped 1.3 percent to 237,364.
GM said it had been trimming sales of heavily discounted vehicles to car rental companies. Such fleet sales made up about 19 percent of its total sales in May.
In an interview, GM Chief Economist Mustafa Mohatarem said the sliding value of used cars has discouraged automakers from offering deep discounts on new vehicles to rental car companies. Hertz, Avis and other rental companies either will have to pay higher prices, he said, or automakers will cut production further in hopes of supporting used-car resale values.
Ford’s fleet sales rose 8.4 percent, representing more than 34 percent of total sales. The industry average is around 20 percent.
Fiat Chrysler Automobiles (FCHA.MI)(FCAU.N) said May sales dipped 0.9 percent to 193,040. Toyota Motor Co’s (7203.T) U.S. sales dropped 0.5 percent to 218,248. Honda Motor Co (7267.T) was up 0.9 percent, to 148,414, while Nissan Motor Co (7201.T) rose 3.0 percent, to 137,471.
Manufacturers and dealers “really pushed the deals over the holiday weekend to prop up their May numbers,” said Jessica Caldwell, executive director of industry analysis at Edmunds, the car shopping website.
General Motors dealers were offering discounts of up to $12,000 on the full-size Chevrolet Silverado pickup, while some dealer discounts on Ford Motor Co’s F-series pickups were more than $10,000 on 2017 models and more than $14,000 on leftover 2016 models.
Reporting by Paul Lienert in Detroit; Editing by Bernadette Baum and David Gregorio