Wednesday, June 20, 2018

Weak U.S. February sales chill automaker stocks on Wall Street

By on March 1, 2018

By Nick Carey

DETROIT – Major automakers reported lower U.S. new vehicle sales for February on Thursday as consumer demand continued to cool despite strong crossovers and SUV sales, but surprisingly weak pickup truck sales dented the share prices of Detroit carmakers.

“Trucks are higher-margin products and from a mix standpoint, February was disappointing,” said John Toohey, head of equities at USAA Asset Management Company in San Antonio, Texas, which has $166 billion in assets under management. “If this continues, that’s a profitability headwind.”

No. 1 U.S. automaker General Motors Co posted a 6.9 percent decline in overall sales from February 2017. The automaker said sales to consumers were down 10 percent “compared to an exceptionally strong February 2017.”

GM’s lower-margin fleet sales climbed 7 percent, driven by a 15 percent rise in commercial vehicles. Crossovers and SUVs fared well in GM’s sales.

But its Silverado and Sierra pickup truck models dropped significantly versus the same month a year earlier.

Fiat Chrysler Automobiles reported a 1 percent overall decline in February sales.

While its popular Jeep brand’s total sales surged 12 percent, its Ram pickup trucks sank 14 percent, driven by a decrease in lower-margin fleet sales.

Fiat Chrysler has deliberately pursued a strategy of scaling back lower-margin fleet sales in favor of more lucrative sales to consumers.

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F-Series flies

No. 2 U.S. automaker Ford Motor Co said its sales also fell, by 6.9 percent, with an 8.5 percent drop for retail sales as passenger car sales sank 12 percent.

Unlike its Detroit rivals, Ford saw a 1.2 percent increase in pickup truck sales as its best-selling F-Series models posted their 10th consecutive months of sales gains.

“The F-Series continues to be a great story for us,” Ford’s U.S. sales chief, Mark LaNeve, said on a conference call.

Both GM and FCA have completely revamped pickup truck models hitting the market later this year, and USAA’s Toohey said that might have affected their February sales.

“The optimistic view is that people are just waiting for their next generation of trucks,” he said. “The negative view is that good truck sales are in the rearview mirror.”

“I think it’s probably a mix of both,” he added.

The auto industry has been coming off a long boom that began at the end of the Great Recession.

U.S. auto industry sales fell 2 percent last year to 17.23 million vehicles after hitting a record high in 2016.

New vehicle sales are expected to drop further in 2018 despite a solid economy.

Interest rates are rising and around 4 million late-model used cars will return to dealer lots this year to compete with more expensive new ones.

‘Hibernation’

Historically, February tends to be a weak month for sales.

Michelle Krebs, an analyst for car-shopping website Autotrader, said pickup trucks “did not have a spectacular month, despite some hefty” consumer discounts.

“March and April will truly indicate whether vehicle sales are ready to come out of hibernation,” she said in an email.

GM Chief Economist Mustafa Mohatarem said consumers have not yet fully felt the benefits of a recent U.S. tax overhaul.

“We expect consumer spending to pick up as tax cuts are reflected in pay checks,” he said.

Judy Wheeler, head of U.S. sales for the Nissan brand at Nissan Motor Co echoed that point, adding that strong used-car sales in February might reflect consumer concerns over rising interest rates.

Nissan’s sales fell 4 percent in February, despite a 9 percent rise in sales of pickup trucks, crossovers and SUVs.

Honda Motor Co said its sales fell 5 percent in February.

Toyota Motor Corp bucked the broader trend, posting a 4.5 percent increase in sales in February, as a 10.3 percent gain in SUV and pickup truck sales offset a 2.6 percent drop in passenger cars.

In afternoon trading, GM shares were down 3.6 percent at $37.91, Ford shares were down 2.9 percent at $10.30, and FCA was down 2.4 percent at $20.68.

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