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Automakers See a Ray of Hope

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Original article here: http://online.wsj.com/article/SB123859954307378495.html

Despite reporting another major sales decline in March, auto makers expressed a rare bit of optimism Wednesday, saying they see signs the industry's downturn might be near bottom and a recovery could be starting.

All the big car makers suffered sales declines of 36% or more compared to March 2008. Industrywide, U.S. sales totaled 857,735 cars and light trucks, down 37% from a year earlier, according to Autodata Corp. But that's up from 688,909 vehicles sold in February and was the highest total since September. February's sales were down 41% from a year earlier.

The annualized sales pace, a closely watched indicator, came in at 9.86 million vehicles, well below the 16 million or more the industry typically logged a few years ago, but up from February's pace of 9.12 million.

"I believe we are in a bottoming process for the industry," Bob Carter, a group vice president at Toyota Motor Corp., said in a conference call. Mr. Carter said the company's 18% sales improvement in March compared with February could be "a very early indication that we have floored and some optimism is starting to return to the market."

Michael DiGiovanni, the top sales analyst at General Motors Corp., said he expects a "very, very gradual pickup" in vehicle sales in the second quarter. He cited "the first signs of brightening" in the market. Jim Press, Chrysler LLC's vice chairman and president, said, "The market is starting to show small signs of life which need to be nourished like seedlings." Chrysler, like GM, is seeking additional aid from the government.

The uptick in March's sales pace was helped by sales of cars to fleet customers such as rental-car companies. GM sold 36,000 vehicles to fleets, the company said. That is fewer than a year ago but up from February.

Chrysler sold about 30,000 vehicles to fleets, a person familiar with the company's sales figures said. Foreign auto makers including Toyota and Hyundai Motor Co. also boosted fleet sales in the past year as sales to consumers plunged. Fleet sales often are less profitable than consumer sales.

Higher incentives offered to buyers also pumped up March's sales. Auto makers offered, on average, a record $3,169 in incentives per vehicle sold in March, according to Web site Edmunds.com. The figure represents a jump of $733, or 30.1%, from a year earlier and $171, or 5.7%, from February.

Car makers cited leading indicators in the economy that suggest demand could edge upward in the second and third quarters.

"I can say that we have been seeing some encouraging signs in recent weeks that the pace of economic decline could be moderating," said Ford Motor Co. economist Emily Kolinski Morris, citing reports of stabilization in consumer confidence. Housing starts also increased in February.

Positive signs also include rising used car prices, more cash buyers in the market and the expected return of the government and other large-scale vehicle buyers that will be boosting fleet sales, Ford officials said.

Mr. Kolinski Morris noted, however, that "credit conditions, auto industry restructuring risk and consumer psychology all seem likely to have some part in generating industry sales outcome that is worse than any model based on historical performance would have predicted."

Chrysler's sales fell 39.3% in March, although its total came in at 101,001 vehicles -- the first time since September that sales topped 100,000.

GM's sales declined 44.7% to 155,334 cars and light trucks, Autodata said. Ford sales fell 41% to 131,102 vehicles. Toyota's sales slipped 39% to 132,802 and Honda Motor Co.'s 36.3% to 88,379.

Slumping sales at Chrysler and GM are a concern for the U.S. Treasury, which has given both companies billions of dollars in loans to keep them from collapsing. The Treasury has given Chrysler 30 days to craft a viable turnaround plan centered on a binding alliance with Fiat SpA, and has given GM 60 days to work out its recovery plan.

The Treasury also announced this week that the government will guarantee warranties on GM and Chrysler vehicles to help ease consumer concerns about buying from companies that are at risk of bankruptcy.

But consumer worry is only one trouble Chrysler faces. It lacks the scale auto makers need to compete in a global industry, carries too much debt and cannot afford the spending required to produce the new models it needs to compete, the Treasury's auto task force said in a summary of its findings Sunday.

It was unclear what President Barack Obama's rejection of the GM and Chrysler viability plans and mention of possible bankruptcy restructuring had on sales overall since the discussion came at the end of the month. But Ford sales analyst George Pipas told analysts and reporters Wednesday that "we did see in the last week things start to pick up."


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Gee what a shocker, this recession isn't really all that bad!

If this recession didn't occur during a damn presidential election year this would not have been so politicized and turned into such a debacle.

I always had a nagging at my conscious that we would be out of the recession by the end of this year bailout or no bailout or "stimulus."

Hmmm anyone else find it almost odd that GM was able to outsell Toyota this month? I mean hell Ford nearly sold as many cars as Toyota. I thought consumers were supposed to be avoiding GM and Chrysler.

Edited by Teh Ricer Civic!

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Nope, not that bad of a recession after all. Hell, here in Michigan unemployment is only at around 13%. No big deal! And that is before the further downsizing actions the Feds make GM and Chrysler take not to mention all the supplier bankruptcies that will start happening within the next week or two. When my wife and I are both unemployed (both work for auto suppliers), I'll have to come back into this thread and read your post so I can remind myself that it really isn't that bad and it is all political smoke and mirrors created by election year politics. I'm not sure why the G20 even bothered getting together. :rolleyes:

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