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By Nick Carey and Joseph White
DETROIT May 2 Major automakers on Tuesday
posted declines in U.S. new vehicle sales for April in a sign
the long boom cycle that lifted the American auto industry to
record sales last year is losing steam, sending carmaker stocks
The drop in sales versus April 2016 came on the heels of a
disappointing March, which automakers had shrugged off as just a
bad month. But two straight weak months has heightened Wall
Street worries the cyclical industry is on a downward swing
after a nearly uninterrupted boom since the Great Recession's
end in 2010.
Auto sales were a drag on U.S. first-quarter gross domestic
product, with the economy growing at an annual rate of just 0.7
percent according to an advance estimate published by the
Commerce Department last Friday.
Excluding the auto sector the GDP growth rate would have
been 1.2 percent.
Industry consultant Autodata put the industry's seasonally
adjusted annualized rate of sales at 16.88 million units for
April, below the average of 17.2 million units predicted by
analysts polled by Reuters.
General Motors Co shares fell 2.9 percent while Ford
Motor Co slid 4.3 percent and Fiat Chrysler Automobiles
NV's U.S.-traded shares tumbled 4.2 percent.
The U.S. auto industry faces multiple challenges. Sales are
slipping and vehicle inventory levels have risen even as
carmakers have hiked discounts to lure customers. A flood of
used vehicles from the boom cycle are increasingly competing
with new cars.
The question for automakers: How much and for how long to
curtail production this summer, which will result in worker
To bring down stocks of unsold vehicles, the Detroit
automakers need to cut production, and offer more discounts
without creating "an incentives war," said Mark Wakefield, head
of the North American automotive practice for AlixPartners in
"We see multiple weeks (of production) being taken out on
the car side," he said, "and some softness on the truck side."
Rival automakers will be watching each other to see if one
is cutting prices to gain market share from another, he said,
instead of just clearing inventory.
INVESTORS DIGEST BAD NEWS
Just last week GM reported a record first-quarter profit,
but that had almost zero impact on the automaker's stock.
The iconic carmaker, whose own interest was once conflated
with that of America's, has slipped behind luxury carmaker Tesla
Inc in terms of valuation.
On Tuesday, Tesla's market value was $53 billion, nearly $3
billion larger than GM's.
GM said April sales fell 6 percent, but crossovers and
trucks continued to see strong growth.
Sales at Ford, the No. 2 U.S. automaker by sales after GM,
fell 7.2 percent in April, while Toyota recorded
a drop of 4.4 percent and FCA sales were off 7 percent.
U.S. consumers have increasingly shunned cars in favor of
larger crossovers, SUVs and trucks. While automakers posted
steep sales declines for cars in April, SUVs, crossovers and
trucks were either up or off only slightly.
New vehicle sales hit a record 17.55 million units in 2016.
But as the consumer appetite for new cars has waned, automakers
have leaned more heavily on discounts.
GM said its consumer discounts were equivalent to 11.7
percent of the transaction price. The automaker also said its
inventory level rose to 100 days of supply at the end of April
versus around 70 days at the end of 2016.
Recent levels have worried analysts, and GM has promised
inventories will be down by the end of 2017.
On a conference call Mark LaNeve, Ford's vice president for
U.S. marketing, sales and service, insisted the industry was
"relatively constrained" in offering discounts in April.
Ford car sales dropped 21 percent and trucks declined 4.2
percent, while SUV sales rose 1.2 percent.
Toyota's luxury Lexus brand posted an 11.1 percent slide.
U.S. car sales at the Japanese automaker were down 10.4 percent,
while truck sales were up 2.1 percent.
Nissan Motor Co Ltd said April U.S. sales were off
1.5 percent, but SUVs, crossovers and trucks jumped 11 percent.
Honda Motor Co Ltd reported a 7 percent
decline in sales in April, with cars off 7.4 percent and trucks
up just 0.8 percent.
(Editing by Jeffrey Benkoe and Lisa Shumaker)