U.S. auto sales end '07 on weak note, outlook dims

By Kevin Krolicki

DETROIT, Jan 3 (Reuters) - Major automakers reported lower U.S. sales for December led by a 9 percent slide at Ford Motor Co (F.N) as the industry closed out its weakest year in more than a decade and faced the prospect of deeper declines in 2008.

Ford's slide and gains by Toyota Motor Corp (7203.T) in 2007 made the Japanese automaker the No. 2 player in the U.S. market for the first time on the basis of full-year results.

The monthly auto sales results, one of the first snapshots of U.S. consumer spending, came as oil prices topped $100 per barrel.

Higher gasoline prices combined with a slumping housing market have raised concerns that the U.S. economy could tip into recession in 2008 and cause consumers to delay big-ticket purchases such as new vehicles.

Shares in both GM and Ford slipped to their lowest levels since mid-2006 in advance of the December sales results, which came in largely in line with analyst expectations.

General Motors Corp GM.N, which could be topped by Toyota for global sales leadership in 2007, saw its U.S. sales drop 5 percent in December. Excluding heavier trucks, GM's sales were down 4 percent.

Toyota's sales for December were down 1.7 percent, while smaller rival Nissan Motor Co (7201.T) posted a sales decline of 2.4 percent.

Honda Motor Co (7267.T) was the only of the major automakers to have avoided a decline in monthly sales. Honda's results were almost flat, buoyed by sales gains for its Accord and Civic sedans.

On a full-year basis, GM's sales were down 6 percent while Ford sales dropped 12 percent reflecting a sharp pullback in sales to rental car agencies and a decision to scrap models such as the older version of its Taurus sedan.

Ford's retail market share also fell below the 13 percent mark in December, the second month in a row, which it had targeted as the basis for its turnaround efforts.

By contrast, Japanese automakers were all up on a full-year basis. Toyota sales rose 2.7 percent, while Honda's sales gained 2.5 percent. Nissan bounced back from a slow year in 2006 with a 4.5 percent gain.

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Full-year 2007 sales results were not expected to be available until later on Thursday, but were expected to show the industry limping to finish the year with sales of about 16.1 million vehicles, the lowest tally since 1998.

Chrysler LLC, now majority owned by Cerberus Capital Management, had yet to report sales results for December.

GM Chief Executive Rick Wagoner told reporters he expected the market in 2008 would be about as tough as the year just ended.

"There are some obvious reasons for concern, but on balance I suspect '08 will be similar to '07 in total, although likely weaker in the first half and stronger in the second," Wagoner said in response to a question on his outlook for U.S. vehicle sales.

He added: "In the U.S., we expect (overall sales in the) low 16 millions, but some risk given the economic background."

GM sales chief Mark LaNeve said the automaker expected that the current quarter would be the weakest of the year.

Ford executives also said there was reason for caution about sales in the coming months, adding that the full weight of negative factors such as the housing slump had not been felt in the market.

"We see...economic headwinds heading our way," Jim Farley, Ford's global vice president for marketing told reporters and analysts. "We also see competitors and the competitive environment and the pricing that has surrounded that...being a big dictator on what happens in '08."

Nissan's U.S. sales chief Mark McNabb said he expected sales over the first few months of 2008 would show how hard the housing crisis would hit. "That is a little hard to predict right now," he said.

Most major automakers, with the exception of Ford, report percentage changes in sales, including full-year results, after adjusting for the number of sales days. December had 26 sales days, unchanged from a year earlier.

Shares of Ford were trading at down 16 cents at $6.44; GM's shares were also down 60 cents to $23.81. Both companies trade on the New York Stock Exchange. (Additional reporting by Poornima Gupta, editing by Leslie Gevirtz)