Despite GM "Employee Discounts," Outlook Poor for August Auto Sales

Despite generous discounts, including the "Employee Discount for Everyone" promotion from General Motors, expect the bad news in auto sales to continue, based on a couple of forecasts posted this week, ahead of August sales announcements from the car companies, slated for Sept. 3.

GM sales would have been even worse without the sale, said Jesse Toprak, executive director of industry analysis for Edmunds.com. Nevertheless, Edmunds expects GM sales to fall in August about 27.5 percent from the year-ago month.

GM unveiled the discounts on Aug. 19. The deals are expected to expire on Sept. 2. GM's original Employee Prices for Everyone sale worked like gangbusters back in 2005, clearing out a big inventory of unsold cars and trucks. It worked so well, Ford and Chrysler were forced to follow suit.

The downside was, sales were depressed for months afterwards, and ever since, sales in the summer months looked puny, compared with the sales spike in the summer of 2005. The experience also reinforced consumers who believe â€" correctly â€" that with very few exceptions, like today's Toyota Prius or the Mini Cooper, nobody pays retail any more.

For the overall U.S. industry, Edmunds said on Aug. 28 it expected August sales to fall about 14.4 percent from the year-ago month. Year to date through July, sales were about 8.5 million cars and light trucks, down 10.5 percent from the year-ago period, according to AutoData.

Separately, Lehman Brothers auto analyst Brian Johnson put out an even more pessimistic forecast on Aug. 28, predicting U.S. industry sales would fall 19.2 percent from the year-ago month.

Earlier this month, Lehman Brothers cut its 2008 light vehicle sales forecast from 14.4 million to 14 million units. That would be the lowest since 1993.

"The very difficult environment for auto sales continues to take a much heavier toll on the Big Three, which are being hit disproportionately by the consumer's dramatic shift away from traditional trucks towards more fuel efficient vehicles," Johnson said.