Shortages of key models temper auto sales growth in August

DETROIT Tue Sep 3, 2013 4:52pm EDT

A member of the media fits into the RamBox storage area in a 2012 Dodge Ram 1500 pickup truck during the first media preview day at the 2012 Chicago Auto Show in Chicago, Illinois February 8, 2012. REUTERS/Frank Polich

A member of the media fits into the RamBox storage area in a 2012 Dodge Ram 1500 pickup truck during the first media preview day at the 2012 Chicago Auto Show in Chicago, Illinois February 8, 2012.

Credit: Reuters/Frank Polich

DETROIT (Reuters) - Youngstown, Ohio-based Chrysler Group LLC dealer Chuck Eddy typically has between 30 and 60 Chrysler 200 sedans on hand to sell to willing customers. Right now, he has six.

Shortages of this "bread and butter" vehicle and other models such as the Town & Country minivan and Ram 1500 pickup truck will prevent Eddy from meeting his August sales target.

"I'm probably going to miss my forecast by 20-some units and I attribute that to a lack of inventory, not lack of interest or new product," Eddy said in an interview. "We're not able to restock at the rate that we're selling."

More than four years after a scorching financial downturn pushed General Motors Co and Chrysler into bankruptcy, the auto industry is struggling to keep up with demand for new cars and trucks. On Wednesday, major automakers report August sales, which are expected to reflect these issues.

While August sales are expected to jump 14 percent, dealers and analysts said shortages of key models like the 200 and Ford Motor Co's Fusion midsize sedan tempered growth. The annual auto sales rate in August is expected to be 15.8 million, in line with July's pace, according to 45 economists polled by Reuters.

Inventory shortages came to a head in August, traditionally a strong sales month driven by end-of-model-year clearance sales. In a survey by RBC Capital Markets, 19 percent of dealers said inventory was too low during the month of August, compared to 9 percent in July and 4 percent in June.

Ford has faced the most acute vehicles shortages, with dealers clamoring for more Fusion sedans and Escape crossovers.

"Ford could have been up double digits, but has been hampered with production issues from both the Escape and Fusion," Kelley Blue Book analyst Alec Gutierrez said.

Ford sales are expected to be up nearly 10 percent in August, KBB said. The industry data firm expects GM to report a 10.2 percent increase and Chrysler to show a 13.2 percent jump. Toyota Motor Corp will report a 13.5 percent rise, while Honda Motor Co will be up 17.3 percent.

GM, Ford and Chrysler are all running their factories around the clock to build enough vehicles to satisfy demand. Last week, Ford began building its Fusion at a factory in Flat Rock, Michigan to boost availability of the midsize sedan. <Id:nL2N0GU1FW>

Eddy and analysts expect the availability of models to improve throughout the rest of the year as automakers devote more capacity to building cars.

Dealers and analysts were quick to point out that having too few vehicles to sell is a "good" problem for the industry, which relied on large incentives to spur sales during the downturn.

"It was a very inefficient model and that's why two of three Detroit automakers went bankrupt," said Barron Meade, a former Detroit-area dealer and president of Next Up Consulting LLC, which works with dealers on business development.

"It creates pressure," Meade said, of the current shortages. "But it's a much better pressure than what we used to have."

Monthly auto sales are viewed as an early indicator of the U.S. economy's health. The industry has held up better than the broader economy due in part to consumers' need to replace aging vehicles, which now average more than 11 years.

(Reporting by Deepa Seetharaman; editing by Andrew Hay)

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