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Confidence Over Autos Stays Firm

August 10, 2011
3 min to read


DETROIT - The auto industry isn't taking its foot off the gas in the wake of the turbulence on Wall Street, at least not yet.


Auto makers, dealers and industry analysts are all still expecting the pace of new-car sales to pick up in the second half of the year, undeterred by recent stock-market gyrations, according to The Wall Street Journal.

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"The only question is the rate of the recovery in auto sales, not if there is going to be a recovery," Michael J. Jackson, chairman and chief executive of AutoNation Inc., the country's largest chain of car dealerships, said during an interview.


He added that he is sticking to his forecast that U.S. auto sales will total roughly 12.5 million cars and light trucks this year. That would represent about an 8 percent rise from 2010.


In a presentation Tuesday for financial analysts, General Motors Co. reiterated its forecast for U.S. industry sales between 13 million and 13.5 million vehicles this year, including medium and heavy trucks. Making note of the turmoil on Wall Street, GM Chief Executive Dan Akerson said, "My personal expectation is on the low end of that."


Toyota Motor Corp. and KBB.com, an auto-information website, also reaffirmed their 2011 sales forecasts of about 12.5 million light vehicles.


At times, falling stock prices can slow auto sales by undermining consumer confidence and making shoppers feel less wealthy. But auto executives aren't worried that the market will resume its recent declines.

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Earl Hesterberg, chief executive of Group 1 Automotive Inc., a big dealership chain based in Houston, said he isn't ready to give up on the expectation of improved auto sales later this year just "because we had two bad Dow days. Now if on Friday we've had five bad Dow days, I might change my mind."


Industry analysts also said auto sales are underpinned by good credit availability. Most consumers with good credit records have no trouble getting car loans right now—a key difference from two years ago, during the recession, when the lack of credit helped drive down auto sales. Many consumers also deferred purchases of new vehicles during the recession and are now shopping for new wheels to replace aging vehicles.


The auto industry has suffered a softening of sales since May because of a shortage of Japanese-brand vehicles, a lingering effect of Japan's March 11 earthquake. Because of the tight supply situation, auto makers have pulled back on the kinds of deals and sales incentives that typically lure consumers into showrooms.


But Toyota and Honda Motor Co. are now ramping up production, and deliveries to dealers are expected to increase later this month and next. With a larger supply of cars on dealer lots, auto makers will likely juice rebates and incentives to move them off, said Morningstar Inc. auto analyst David Whiston.


"There are many loyal Toyota and Honda customers who have been patiently waiting for their Lexus, Prius or Civic to be back in stock, so I expect those customers to still buy later this year," Mr. Whiston said. He added that he isn't worried about a "huge drop" in auto sales as a result of Wall Street's turmoil and the downgrade in the U.S. government's credit rating.

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