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Auto industry recovering at snail's pace

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Auto industry recovering at snail's pace

Christine Tierney / The Detroit News

Like most sectors of the economy, the auto market appears to be recovering very slowly.

U.S. auto sales forecasts for September estimate that the selling pace rose from August levels, but is still stuck in a narrow range between 11 million and 12 million light vehicles on an annual basis.

"Nearly all carmakers are indicating sales volume around Labor Day was particularly strong, though the message thereafter seems mixed," said auto analyst Himanshu Patel at investment bank J.P. Morgan.

He estimates the monthly selling pace has risen to 11.9 million cars and light trucks, up from 11.4 million in August.

Forecasting firm J.D. Power and Associates and investment firm Bank of America -- Merrill Lynch put the September selling rate at 11.8 million light vehicles.

Deutsche Bank's estimate is for a selling pace of 11.6 million, while online auto research firm Edmunds.com sees the rate up marginally in September, to 11.47 million light vehicles.

On a retail basis -- excluding sales to rental car firms and other fleet customers -- Edmunds estimates that the seasonally adjusted, annualized sales rate was unchanged in September from August's 9.4 million light vehicles.

Compared with a year ago, September auto sales are expected to show a big increase -- but that's because demand was very weak in September 2009 following a surge in demand fueled by the government's "cash for clunkers" incentives.

After a spike in the selling rate to 14.17 million light vehicles in August 2009, it sank to 9.38 million last September.

This year, the selling rate has bumped along in a range between 10.8 million in January and 11.73 million in March, slightly below the industry forecasts made at the start of 2010.

Although a government panel of academic economists declared last week that the recession was officially over, consumers are still feeling cautious because of the stubbornly high jobless rate and continuing volatility in the financial markets.

"Despite some noteworthy new car introductions, auto sales are stagnant right now," said Jessica Caldwell, an analyst at Edmunds. "Automakers seem to have accepted the current sales rate. Most seem reluctant to invigorate the market through traditional incentives programs or unload significant levels of inventory as fleet sales."

Incentives are averaging $2,595 per vehicle this month, down $106 from last month, and down $151 from last September, according to Edmunds' estimates.

Incentives and fleet sales tend to erode automakers' profitability and manufacturers, particularly Detroit's Big Three, have tried to cut back.

This year, they are better able to handle the difficult environment after restructuring their operations in 2009 to slash production capacity and costs.

From The Detroit News: http://www.detnews.com/article/20100926/AUTO01/9260309/1148/auto01/Auto-industry-recovering-at-snail-s-pace#ixzz10jnFmxDh

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