Storm Sandy knocks U.S. October auto sales below estimates
DETROIT (Reuters) - Superstorm Sandy's fury caused U.S. auto sales to fall short of expectations in October, but industry executives still see a strong fourth quarter as the housing market improves.
While General Motors Co (GM.N) and Chrysler Group LLC both reported their strongest sales for October since the 2007-09 financial crisis, the massive storm that hit the U.S. East Coast took as much as 30,000 vehicle sales out of the mix by keeping shoppers away from dealers.
"Clearly, the storm had a bigger than anticipated impact on sales," said TrueCar.com analyst Jesse Toprak. "It's not the blockbuster month perhaps that we anticipated, but I would still say it's a healthy rate."
The U.S. auto industry ended October with a 7 percent increase in vehicle sales to more than 1.09 million, the highest level in October since 1.23 million sales were reported for that month in 2007. That was below the 11 percent increase analysts had expected, however.
Auto sales are an early indicator each month of U.S. consumer demand.
Ford Motor Co's (F.N) U.S. sales last month edged up 0.4 percent, while sales for Toyota Motor Corp (7203.T) and Honda Motor Co (7267.T) rose about 16 percent and 9 percent, respectively. Nissan Motor Co Ltd's (7201.T) sales fell 3.2 percent.
GM sales rose 4.7 percent, while those at Chrysler, the automaker controlled by Italy's Fiat SpA FIA.MI, increased 10 percent.
Still, results from all the major automakers came in below expectations, and the 14.3 million annual selling rate in October fell well short of the 14.9 million economists had predicted before Sandy pummeled the East Coast. Toyota said that until Sandy arrived, the industry had been heading for an annual selling rate of 14.7 million vehicles.
Auto executives and analysts said the industry will recoup much of the Sandy-related lost sales in November and December, especially after election day on Tuesday. Some automakers, including GM, Nissan and Toyota, are even offering deals to customers in regions hit by the storm.
Over the last five years, the U.S. auto sector has undergone a wrenching overhaul that led to plant closures, job losses and the government-financed bankruptcy restructurings of GM and Chrysler in 2009. Ford also overhauled its U.S. operations, but did not take a government bailout.
The October sales report will be the last before election day, marking the end of a contentious U.S. presidential race that has repeatedly thrust GM and Chrysler into the spotlight in televised debates, stump speeches and campaign advertisements.
"As far as the election is concerned, they've made the economy a centerpoint of their mudslinging," Kurt McNeil, GM's vice president of U.S. sales operations, said on a conference call. "That just has caused some uncertainty in the consumers' minds. Once we get past the election, all of these strong economic fundamentals are going to continue to play out."
Citing an improving housing market that should help the industry record a strong fourth quarter, GM sees industry sales for this year at close to 14.5 million vehicles. Ford expects about 14.4 million. That would be the highest annual total since 16.1 million vehicles in 2007. Consumers generally feel more comfortable making big-ticket purchases such as cars when home values are rising.
The massive storm, which hit the U.S. Northeast on Monday, hurt U.S. demand at the end of the month, with Ford officials estimating the lost sales for the entire industry at 20,000 to 25,000 vehicles. Toyota estimated the loss at 30,000 vehicles.
Ford officials said their estimate translates to a hit to October's annual sales rate of 300,000 vehicles. GM officials agreed, saying Sandy hurt the annual rate by at least 300,000 vehicles.
TrueCar's Toprak said dealers often exceed 40 percent of total sales for any month in the last seven days. GM said its dealers from the Washington area through New England, including parts of Pennsylvania, had damaged cars and some were literally under water. In fact, half of GM's dealers in New Jersey were still without power.
Volkswagen AG's (VOWG_p.DE) U.S. operations chief, Jonathan Browning, sounded a note of caution.
"This is not yet a full-blown recovery," he said on a conference call. "The overall environment is one of improving optimism, but it's still not a strong positive development in terms of the overall economy."
He added that demand had been choppy in some regions even before Sandy. The German automaker's combined U.S. sales for its VW, Audi and super luxury brands rose 20 percent in October.
Many automakers still made gains in the month as rising home prices, attractive vehicle financing options and Americans' growing need to replace their aging cars spurred more consumers to showrooms. That bodes well for the future, as GM's McNeil said an improving housing market could be the "final piece of the puzzle" that lifts industry sales above 15 million annually.
The sales report also caps a busy week for the U.S. auto industry, which saw third-quarter profit reports from all three Detroit automakers.
GM shares closed 0.7 percent higher at $25.68 on Thursday, while Ford shares gained 0.8 percent to close at $11.25.
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