U.S. auto sales plunge, drag market down in May

DETROIT (Reuters) - U.S. auto sales tumbled in May as consumers spurned pickup trucks and SUVs in the face of record gasoline prices, driving General Motors Corp, Ford Motor Co and Chrysler LLC to double-digit declines.

Japan's Honda Motor Co outsold Chrysler for the first time to emerge as the new No. 4 U.S. automaker, while Toyota Motor Corp closed the gap with GM as the leading player in the U.S. market, despite lower sales.

Honda's Civic and Accord and Toyota's Camry and Corolla sedans all outsold Ford's F-Series pickup truck. It was the first time a sedan outsold the perennial Ford bestseller since 1991, with Honda's success helping its shares jump 8.6 percent in Tokyo.

"It is a watershed month. It's a sign of the times," said Jim Farley, Ford's head of marketing, who joined the U.S. automaker last year after 17 years at Toyota.

GM sales plunged 30 percent, Ford sales fell 19 percent and Toyota's fell 8 percent. GM's U.S. market share slid to 19 percent in May, a record low for the embattled automaker that commanded 45 percent in 1980.

In contrast, Japanese brands' combined market share topped 40 percent for the first time with Honda sales up 11 percent and Nissan Motor Co up 4 percent. For a graphic see:

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GM also announced plans to close four pickup and SUV plants in North America and expand output at two car plants to meet customer demand that is increasingly dominated by concern about fuel efficiency.

Satoshi Aoki, head of the Japan Automobile Manufacturers Association, said he saw cars grabbing even more market share.

"One thing that's certain is that consumer interest in fuel-efficient, environmentally friendly cars will grow," Aoki, also the chairman of Honda, told reporters in Tokyo.

Overall, U.S. sales fell to 14.25 million on an annualized basis in May, down from 14.4 million in April and 15.2 million on average in the first quarter. Sales were adjusted for an additional sales day compared with the year earlier.

Car sales, which had accounted for less than half of industry volume in 2007, surged to 57 percent in May. On the losing end, truck sales hit their lowest rate since 1995.

JAPANESE SHARES UP

The results, as well as the weaker yen, boosted Japanese automakers' shares in Tokyo. Nissan gained 5.3 percent, Toyota climbed 3.2 percent, and Mazda Motor Corp jumped 9.1 percent, outperforming a 1.6 percent gain for the market's benchmark Nikkei average.

Shinya Naruse, analyst at Nomura Securities, said a shift toward smaller cars from large vehicles has become even more obvious, but concerns remained about the U.S. market.

"Japanese automakers grew as they are relatively strong in smaller cars. It's almost unthinkable SUVs and pickup trucks will regain popularity as oil prices are unlikely to drop drastically.

"Still, the data is not something we can be happy about. The U.S. auto market is deteriorating and profitability is falling as the cars that sell are small ones."

Toyota said it no longer expected 2008 sales to match last year's record results, owing to the decline in truck demand and the slump in the U.S. economy.

"All of our previous assumptions on the full-size pickup truck segment are off the table," Toyota division sales chief Bob Carter said on a conference call.

The weak sales results add to concerns the U.S. auto market is headed for its worst year in a decade amid high oil prices, weak consumer confidence and tighter credit.

"I think the shift was more dramatic than we thought," said Jesse Toprak, an analyst with industry tracking firm Edmunds, who had forecast a widespread consumer defection from trucks.

Toprak said sales results showed U.S. automakers could succeed with small car offerings even if they still struggle to make them at a profit.

The shift toward more fuel-efficient cars and crossovers has hit Detroit-based automakers and their truck-heavy line-ups particularly hard. Sales for GM's Hummer SUV line dropped 60 percent in May as the automaker said it would sell or revamp the brand, which has become synonymous with gas-guzzling excess.

GM also lowered its second-quarter production forecast but set a third-quarter production target just over 1 million vehicles, or 3 percent higher than year-ago levels.

JP Morgan analyst Himanshu Patel said the higher production suggested GM was looking to rebuild inventories. A three-month strike at its supplier American Axle & Manufacturing Holdings Inc had cut deeply into GM production through May.

Declining U.S. sales prompted Ford to announce an incentive plan on its F-Series pickup trucks allowing customers to pay the same price as the automaker's employees in June. The company is looking to run down pickup truck inventories ahead of a new model launch this fall.

Toprak said incentives were likely to rise throughout the summer months to help boost vehicle sales.

(Additional reporting by Aiko Hayashi and Chang-Ran Kim in Tokyo; Editing by Gerald E. McCormick and Andre Grenon)