April auto sales plunge 14 percent

By David Bailey

DETROIT (Reuters) - U.S. auto sales fell 14 percent to their lowest annual rate in a decade in April as weak consumer confidence and rising gas prices hit the industry's most profitable vehicles hardest.

General Motors Corp, Ford Motor Co and Chrysler LLC posted deeper sales declines than expected, led by a sharp drop in trucks and SUVs. GM sales fell 23 percent, Ford 19 percent, and Chrysler nearly 30 percent, the automakers said on Thursday.

Asian competitors also struggled, with Toyota Motor Corp posting a 5 percent decline, and Nissan Motor Co sales dropping almost 2 percent.

Auto sales represent one of the first monthly snapshots of U.S. consumer demand, and investors have looked to the reports for evidence of whether the U.S. economy has slipped further toward recession since the start of the year.

The returns were bleak.

"Almost no one buys new vehicles because they have to, they want to. And in order to want to they have to feel good about their future," said Erich Merkle, director of forecasting for consulting firm IRN Inc. "That's just not the case today."

Overall U.S. sales fell to about 14.4 million units on an annualized and seasonally adjusted basis in April, marking the worst result for the industry since August 1998, according to Autodata Corp.

Of equal concern to automakers, buyers defected from high-margin trucks and SUVs to cheaper and more fuel-efficient cars more rapidly than expected due to high gasoline prices.

Cars accounted for 53 percent of sales in April with light trucks near 47 percent, a nearly complete reversal of the share of the categories a year earlier, according to Autodata.

The market shift toward cars has favored Japanese automakers with more established small car offerings.

By contrast, the trend has pummeled the truck-heavy lineups of Detroit-based automakers with the average price of regular unleaded gasoline punching above $3.62 per gallon on Thursday, a record high, according to AAA.

The three Detroit-based automakers had just a 48 percent share of the world's largest vehicle market in April, down 5 percentage points from a year earlier.

But even Toyota, now the world's largest automaker and No. 2 in the U.S. market, faced pressure in April as a decline in its truck sales more than offset gains for small cars like the Yaris and the Prius hybrid.

EXPECTATIONS UNDER PRESSURE

In recent weeks, all major automakers have scaled back expectations for 2008 U.S. auto industry sales.