Auto sales wobble in June, GM plunges

By Chang-Ran Kim and Kevin Krolicki

TOKYO/DETROIT (Reuters) - General Motors Corp. (GM.N) on Tuesday posted a steeper-than-expected 24 percent drop in U.S. sales in June as local automakers lost share to Toyota Motor Corp. (7203.T) and other Japanese brands, and demand sputtered overall in the face of high gas prices and a weak housing market.

Shares of GM dropped more than 4 percent after the holiday-shortened close of trade on the New York Stock Exchange in reaction to the sales shortfall and indications the largest U.S. automaker would have to respond with bigger discounts.

Sales for GM's Detroit-based rivals also slid for June, while Toyota, Honda Motor Co. (7267.T) and Nissan Motor Co. (7201.T) all gained ground after taking the unusual step of increasing spending on showroom discounts.

"The sales boost (for the Japanese brands) came from the big incentives spending," said Atsushi Kawai, auto analyst at Mizuho Investors Securities in Tokyo. He added he expected a gentle rise at top Japanese brands on average for the rest of the year.

Nissan's sales gained an industry-leading 18 percent also in reaction to a sharp drop the year before when engine fires had forced the company to halt sales of the big-volume Altima sedan.

Toyota's sales gained 6 percent, and Honda's rose 7 percent.

Ford Motor Co. (F.N) sales were down 11 percent, while Chrysler's fell 5 percent. Both declines by the loss-making Detroit-based automakers were in line with cautious analyst expectations as the industry closed out a weak second quarter.

Industry-wide first-half sales were down 1.5 percent, although Toyota bucked the downtrend with a 9 percent gain over the six-month period. That put it ahead of Ford for the U.S. market's No. 2 spot as it outsold GM in passenger cars.

TOYOTA MUSCLES UP ON TUNDRA

In a sign of Toyota's new-found muscle, the Japanese automaker rattled Detroit by offering zero-percent financing and cash rebates on its all-new Tundra pickup truck in June.

That aggressive discounting caused sales of Toyota's new full-size truck to more than double in June, stealing share in the last U.S. market segment dominated by the Detroit Three.

"The bottom line was that it was a tough quarter and a first half that was weaker than we expected," said GM sales analyst Paul Ballew.

GM was the only major automaker to throttle back on incentive spending compared with May, according to industry data, and it paid the price.

Ballew said some of GM's shortfall could be attributed to lost sales as its own all-new Silverado truck went head-to-head against the heavily subsidized Tundra.

"What we saw in the month was beyond what we could have imagined," Ballew said, calling Toyota's margin-sacrificing sales strategy "a bit of a curveball."