GM Auto Sales Drop 7% in August

(AP)  Last Updated 1:11 p.m. ET

Auto sales, once a bright spot in the economic recovery, stalled last month as the nation's largest car companies reported falling sales.

General Motors Co.'s August sales fell 7 percent from July, and an even sharper 25 percent from August of 2009, when sales were boosted by the government's Cash for Clunkers rebates. Ford saw sales slip 5 percent from July. Subaru, whose strong lineup of smaller cars benefited from clunkers last year, also suffered.

Buyers who are nervous about the economy's health stayed away from showrooms, a worrisome sign since August is typically a strong month. Analysts say total industry sales could fall below 1 million new vehicles, making it the worst August in 27 years. All automakers report sales figures on Wednesday.

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"There hasn't been enough horsepower behind the recovery to motivate consumers to regain their confidence and purchase vehicles at a higher rate," says Jeff Schuster, executive director of global forecasting for J.D. Power and Associates.

Also, potential buyers are having a harder time getting big discounts.

Automakers have been reluctant to increase incentives such as rebates and low-interest financing. Most car companies are making money at lower sales levels because they've cut production. They no longer need to offer cars at below break-even prices just to move them off lots.

"We know it's going to be a modest recovery, it's going to be bumpy," said Don Johnson, GM's vice president of U.S. sales. "What we don't want to do is get back to putting incentives on the vehicles to keep the plants running."

GM's four remaining brands Chevrolet, Buick, GMC and Cadillac dropped 11 percent versus August of last year. While Buick, GMC and Cadillac reported increases, Chevrolet, the company's largest brand, slipped because of the tough comparison with August of last year. That's when buyers snapped up many of Chevy's small cars under the clunkers program.

The clunkers comparison also hurt small-car specialists like Subaru, where sales fell 22 percent in August. Subaru was unable to match big sales last year of its smaller Impreza and the Legacy models. Sales fell 7.2 percent from July.

Small cars sold well last August because of the $2.8 billion clunkers program, which ran from July 27 to Aug. 25. It gave government rebates to people who bought new vehicles with better gas mileage than their old vehicles. Buyers got either $3,500 or $4,500, depending on how much the mileage was increasing. All trade-ins had to get 18 mpg or less. Nearly 700,000 new vehicles were bought under clunkers.

At GM, Buick sales rose 66 percent over August of last year, while Cadillac sales jumped 83 percent, led by the new SRX crossover. Chevrolet, though, dropped 22 percent, mainly because it sold about 20,000 Cobalt and Aveo small cars under the clunkers program. GM said Buick is the fastest-growing brand in the industry. Its increase was driven by the LaCrosse midsize luxury car, which saw sales almost double.

GM's sales are up 5 percent so far this year as it prepares for an initial public offering of its stock, which could happen as early as October. Wednesday was also Daniel Akerson's first day as GM's new CEO, taking over from Ed Whitacre.

[tsigili]

Not surprised. Car prices have exceeded the ability of the consumer to pay for them.

[ajvw]

good to see government motors doing so well