May auto sales limp amid Chrysler, GM turmoil

By David Bailey and Nick Carey

DETROIT (Reuters) - A late month surge in sales from Chrysler dealerships that are losing their franchises as part of the automaker's bankruptcy may have driven U.S. auto sales in May to levels above those seen in recent months.

But automakers are expected to report steep sales declines from a year earlier with the U.S. economy in a tailspin, the industry reeling from Chrysler's bankruptcy on April 30 and an expected General Motors Corp bankruptcy filing on Monday.

"We will probably see a little upside, a little pop," said Mirko Mikelic, an analyst at Fifth Third Bank. "But other than that sales will probably be much the same as in April."

"More people will probably have been looking at cars," he added. "But consumers are not ready to open their wallets."

Deutsche Bank said it expected light vehicle sales to be down 36.5 percent year-over-year in a survey taken just before the Memorial Day weekend, which is seen as the start of the busy U.S. summer driving and car buying seasons.

The six largest automakers all are expected to post sales declines from a year earlier, led by a 54 percent drop at Chrysler, according to industry tracking firm Edmunds.

DEATH RATTLE

A late May sales surge at dealerships being eliminated may have pushed Chrysler's sales higher and the industry as well, Ford's chief sales analyst George Pipas said on Friday. That would not indicate a sustained recovery in sales, he said.

"I think we won't have a true picture for some time as to what is happening with industry sales," Pipas said.

Edmunds expects GM sales to drop 36.9 percent, Ford Motor Co 28.5 percent, Toyota Motor Corp 40.6 percent, Honda Motor Co Ltd 39.3 percent and Nissan Motor Co Ltd 35.1 percent.

A Reuters poll of analysts found a median expectation for U.S. auto sales to reach 9.4 million units on a seasonally adjusted annualized basis in May, a slight increase from April, but far below the 14.3 million unit rate a year earlier.

The seasonally adjusted annual rate is a key measure used by economists to gauge the health of the U.S. economy. Auto sales are also one of the earlier economic indicators.

At the height of the recent credit-fueled boom, U.S. auto sales reached 17 million units in 2005.

INCENTIVES AND DEALS

JP Morgan analyst Himanshu Patel said on Wednesday the result could depend on incentives offered by Chrysler dealers in the last selling weekend of the month with the seasonally adjusted annual rate possibly reaching 10 million.