Economic Concerns Lead to Worst August Auto Sales Since 1983

Americans nervous about the drumbeat of bad economic news stayed away from auto showrooms. Automakers nervous about their bottom lines didn't offer deals to lure them in.

As a result, it was the worst August for U.S. auto sales since 1983, when the country was at the end of a double-dip recession. General Motors, Toyota, Honda and Ford all reported declines from the month before and from a year earlier, reported The Associated Press.

The bleak results were a reminder that, for all the good news about the turnaround of the Detroit automakers, the market for cars and trucks in the United States remains frail. Initial data showed sales came in at about 997,000, down 5 percent from July, according to AutoData Corp.

"Coming in below a million units is eye-opening for August," said Paul Ballew, a former chief economist for GM. "I never thought I'd see that. That's a tepid month for August, which is supposed to be one of the top months of the year."

Auto sales are better this year than in 2009 but much weaker than they were before the recession. In response, Ford on Wednesday cut its fourth-quarter production plans by 4,000 vehicles.

Last August, the government's Cash for Clunkers program offered rebates of up to $4,500 for trade-ins and helped sales, especially for fuel-efficient cars. There is no such incentive now.

In addition, automakers were stingy about deals. After years of painful restructuring, car companies have cut production, and they no longer need to offer big discounts to move cars off lots.

Automakers kicked in an average of $2,858 in incentives per vehicle last month, down $177 from the month before, according to J.D. Power and Associates. It was the fifth month of lowered or flat incentive spending.

"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 in the marketplace to keep the plants running."

Automakers can also count on other markets to make their profits. In China, August sales rose 56 percent over last August, to about 1.2 million vehicles.

In the U.S., though, customers remain hesitant.

"Buyers are still kind of wrestling with this new reality of incentives that aren't going to be as great as they've been in the past," said Jeff Schuster, executive director of global forecasting for J.D. Power and Associates. "Eventually they'll say, 'This is how it's going to be,' and come back."

Schuster said some buyers might be waiting for Labor Day sales this weekend. The sales may not be great compared with previous years, but they'll look better simply because promotions have been so scarce, he said.

Chrysler, which rolled out a new Jeep Grand Cherokee, was the only major automaker to report August gains. It also did not benefit as much as competitors from the Clunkers program because it relies more heavily on trucks and large cars.

Also, because they didn't get a lift from Clunkers, luxury cars and SUVs sold better this August than in 2009. Sales of the GMC Yukon came in 92 percent better, the Ford Expedition 57 percent better. Jaguar sales rose 62 percent, and Porsche was up 33 percent.

But sales of small, fuel-efficient cars were down in August from a year ago, when the rebates were in effect — 35 percent for the Toyota Prius, 40 percent for the Ford Focus and 67 percent for the Chevrolet Aveo.

Automakers figure total sales for this year will come in at about 11.5 million. In 2007, the last year before the recession struck the United States in force, sales came in at about 16 million.

High unemployment and the shaky housing market have made Americans reluctant to spend money. But Ford Motor Co.'s senior U.S. economist, Emily Kolinski Morris, noted that households are saving more money, cash that will be ready when they need a new car. Also, more vehicles have been scrapped than sold over the last 18 months, indicating pent-up demand, she said.

Overall, sales at Ford were down 5 percent from July and 11 percent from last August. At GM, sales of its four remaining brands were down 7 percent from a month ago and 11 percent from a year ago.

For the year so far, sales are up 5 percent at GM, which is preparing for an initial public offering of its stock that could come as early as next month. The IPO will allow the government, GM's majority shareholder, to unload some or all of its holdings. Wednesday was also Daniel Akerson's first day as GM's CEO, taking over from Ed Whitacre.

At Toyota, sales plunged 34 percent compared with last August and 12 percent from July. The poor comparison to last August was expected because Cash for Clunkers helped smaller Toyota cars like the Corolla and Camry sedans.

For August compared with July, sales fell 3 percent at Honda, 7 percent each at Nissan and Subaru and 8 percent at Kia Motors Corp. All of them reported bigger drops compared with August 2009 because of Clunkers sales. August sales at Hyundai were essentially flat.