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Detroit carmaker sales take bigger hit than expected

Ian Thibodeau
The Detroit News

Detroit automakers had a tougher sales month than expected.

Following a sales decline through the first six months of the year, overall U.S. sales in July were down 7 percent from the same month a year ago, on track with what analysts expected. But Detroit’s Big Three had a rougher go of it: General Motors Co. sales fell 15.5 percent. Fiat Chrysler Automobiles dropped 10.5 percent. And Ford Motor Co. sales slid 7.4 percent in that same time, according to numbers released Tuesday by Autodata Corp.

All three of the Detroit automakers saw new vehicle sales drop in July 2017, compared to the same month in 2016.

The companies blamed the drops on lower fleet sales — sales to rental car agencies and other corporate buyers. But GM’s retail sales accounted for most of the decline, off 14.4 percent, the company said.

Experts call it the post-peak phase. Sales are plateauing after record years, and July — typically a good sales month for auto companies — continued that decline.

Carmakers sold 1.42 million new vehicles in July in the U.S., off nearly 107,000 from a year ago.

“As expected, July 2017 sales were difficult compared with July 2016,” said IHS Markit analyst Stephanie Brinley. “Passenger-car sales largely continue to slip, utility vehicle sales to gain. However, some consumers are simply choosing not to buy anything and overall light-vehicle demand is settling rather than accelerating.”

A slower-than-expected start to the year has some analysts calling for a softening market in 2017, with lower year-end expectations. Autodata Corp. on Tuesday adjusted its U.S. sales forecast downward to 16.73 million for the year, off more than 1 million units than its prediction at the start of the year.

But industry analysts and executives maintained, as they have all year, that falling car-segment sales and overall sales are not indicative of the overall health of the auto industry.

“The fundamentals in the industry are still very, very strong,” said Kelley Blue Book analyst Alec Gutierrez. Big-picture indicators like fuel prices, employment levels within the industry and customer satisfaction are all at healthy levels.

At a gathering of auto officials in Traverse City on Tuesday, several analysts delivered a similar message on the state of the industry: “The sky is not falling.”

Jeff Schuster, senior vice president of global forecasting for LMC Automotive, said despite sales numbers out of North America, there are reasons for optimism.

“Transaction prices are up, that’s a very positive thing,” he said. “We’re looking at over $31,000 on average — up over a percent.”

In addition, much of the decline shown in the data pertaining to plant downtime, he said, is due to product changeover.

But Schuster’s review of the industry touched on several areas for concern, including a rise in incentives, inventories that have cars sitting on lots four days longer than a year ago and that the strong fourth-quarter sales enjoyed by the industry in 2016 won’t likely come again.

In North America, all of GM’s brands saw significant year-over-year declines: Buick dropped 30.5 percent; Cadillac declined 21.7 percent; Chevrolet fell 15.4 percent; and GMC dropped 7.3 percent.

The automaker’s bloated inventory also hardly budged from a month ago, dropping from 105 days supply at the end of June to 104 days supply at the end of July. GM has said it plans to cut inventory to about 70 days by the end of the year.

Despite strong performance from the Jeep Compass, Chrysler Pacifica minivan and Ram ProMaster City utility van, Fiat Chrysler sold nearly 19,000 fewer vehicles in July than a year ago.

Ford’s SUV sales increased by 2.2 percent last month, though truck sales, which had been up through the first half of the year, dropped 7.1 percent due to a recall and stop-sale on Transit vans, which has since been rescinded. The average transaction price for trucks increased by $4,600, as customers opted for Super Duty pickups.

Car sales for the automaker dropped 20.6 percent. The company sold 44,893 Ford-brand cars in July; it sold 69,467 F-Series trucks in that same time period. Sales slipped 2.5 percent for Lincoln.

Mark LaNeve, Ford vice president of U.S. marketing, sales and service, said in a call with investors Tuesday that the industry has peaked, and Ford will pay close attention to inventory levels moving forward.

While sales numbers have for most months this year come in softer than expected, LaNeve said he does not think declines are accelerating.

“We’re still operating at a very high level,” he said. “I don’t think it’s as bad as it looks. I think we’re in relatively the same position we’ve been all year.”

Meanwhile, Toyota Motor North America Inc. reported its July sales were up 3.6 percent. American Honda Motor Co. was off 1.2 percent. The company sold 36,683 Civic cars, an 11.3 increase while almost the entire industry is having trouble selling sedans.

Twitter: @Ian_Thibodeau

Staff Writer Jim Lynch contributed