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U.S. Auto-Sales Rate May Be Highest Since April 2008 (Update1)

Aug. 31 (Bloomberg) — U.S. auto sales in August probably will run at the highest rate since April 2008 after the federal government’s “cash for clunkers” rebates fueled demand.

The so-called seasonally adjusted annual rate for this month will be 14.3 million, the average estimate of 10 analysts surveyed by Bloomberg. The figure, an industry benchmark, hadn’t exceeded 10 million in 2009 until the incentive program began in July. Ford Motor Co. may post the biggest monthly sales gain.

Dealers whittled their inventory after purchases of almost 700,000 vehicles through the Car Allowance Rebate System. Sustaining August’s sales pace will be a struggle for the rest of the year now that the government cash is gone, said Joe Barker, an analyst at consultant CSM Worldwide Inc.

“The CAR program has far exceeded most expectations,” said Barker, who is based in Farmington Hills, Michigan. “A sizeable portion of the demand spikes in July and August were pulled forward from September and the fourth quarter.”

August sales results, released tomorrow, will reflect more than three weeks of transactions under the clunkers program, which ran from July 27 through Aug. 24. Buyers of new, more fuel-efficient autos were eligible for as much as $4,500 for trade-ins of older models.

Ford’s sales probably jumped 33 percent, according to 8 analysts. Toyota Motor Corp.’s 8.9 percent increase and Honda Motor Co.’s 3.2 percent climb would be their first gains this year, based on estimates from 4 analysts.

GM, Chrysler

General Motors Co. fell 16 percent and Chrysler Group LLC dropped 5.5 percent, according to 8 analysts. Neither automaker had a vehicle among the 10 best sellers under the government program. Nissan Motor Co., with 1 vehicle among the top 10, slid 8.8 percent, according to four analysts.

The annual sales rate is important to the auto industry because manufacturers, suppliers and dealers use it to compare monthly totals by taking into account seasonal buying patterns. The rate, known as SAAR, is an estimate of full-year deliveries based on an extrapolation from any given month.

U.S. auto sales fell to 13.2 million in 2008 after averaging 16.8 million this decade through 2007.

August vehicle purchases under the clunkers program may have totaled 525,000, Christopher Ceraso, a New York-based analyst with Credit Suisse, wrote in an Aug. 27 note. Of those transactions, about 15 percent would have occurred in August without the incentive program, he wrote.

Production Increases

Ford, GM, and Honda cited the popularity of the federal offers in announcing production increases, while suppliers such as Johnson Controls Inc. are making parts to meet the new demand. The increases boosted consumer spending and will create 42,000 jobs in the second half of 2009, the Treasury said.

August sales may total 1.41 million vehicles, or 13 percent more than a year earlier, Brian Johnson, a Chicago-based analyst with Barclays Capital, wrote in an Aug. 27 note. Meeting that mark would give the industry the first year-over-year gain since October 2007.

A slump in sales after the clunkers rebates ended showed how hard it will be for the industry to replicate its August results. After running at an annualized rate of 15 million early in the month, sales tapered to a pace of 8 million by last week, said Michelle Krebs, a senior analyst at Santa Monica, California-based

“We think it’s a bubble, and the bubble’s burst,” she said. “September could be really tough, maybe even October.”

Even with that decline, second-half sales will exceed those in the first six months of 2009, Krebs said.

‘Demand Fundamentals’

More than 10 million vehicles will be sold this year, as “demand fundamentals continue to improve,” and a “reasonable portion” of people that participated in the program weren’t initially shopping for a new car, Patrick Archambault, a Goldman, Sachs & Co. analyst, wrote in a note Aug. 27.

The Conference Board’s confidence index rose to 54.1 in August, the first gain since May, as consumers became less concerned about the outlook for jobs, the New York research group said Aug. 25.

“Improved consumer confidence and credit availability over the past six months have combined with the CARS program to lift industry sales out of their slumping year-to-date levels,” Gary Dilts, senior vice president at Westlake Village, California- based research firm J.D. Power & Associates, wrote in an Aug. 20 report.

Buyers favored cars over light trucks because of the U.S. incentives, Himanshu Patel, a New York-based JPMorgan Chase & Co. analyst, wrote in an Aug. 25 note. Cars represented 52 percent of U.S. auto sales in the first seven months of 2009, according to Autodata Corp. of Woodcliff Lake, New Jersey.

Toyota, Honda

Toyota, based in Toyota City, Japan, accounted for 19 percent of vehicles purchased under the rebate program, the most of any automaker, the Treasury said. Tokyo-based Honda had 13 percent and Nissan, also based in Tokyo, had 8.7 percent. Vehicles from Seoul-based Hyundai Motor Co. made up 7.2 percent.

GM, Ford and Chrysler autos made up about 39 percent of clunkers sales, less than the companies’ 45 percent share of the U.S. market through July.

The projected August sales gain for Ford compared with a year earlier probably was driven by new-vehicle introductions such as the revamped Taurus and Fusion, and low sales in August 2008, according to Archambault, the Goldman Sachs analyst.

Ford, based in Dearborn, Michigan, fell 18 cents to $7.55 at 9:53 a.m. in New York Stock Exchange composite trading. The shares have more than tripled this year.

Article courtesy of Alex Ortani,

John Paul Strong

John Paul Strong combines his two decades of automotive marketing experience with a team of more than 150 professionals as owner and CEO of Strong Automotive.

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