Auto sales slip but GM bucks trend

DETROIT (Reuters) - General Motors Corp GM.N posted a 5-percent gain in U.S. sales for August on Tuesday, bucking a downtrend for the embattled industry linked to a weaker housing market and a shakeout in subprime lending.

Overall, U.S. auto sales slipped by just under 1 percent in August, a smaller decline than some analysts forecast as discount programs at GM and other major automakers helped spur sales in the face of slack demand.

GM took nearly 26 percent of the U.S. vehicle market in August, its highest market share of the year, as it stepped up discounting on its full-size pickup trucks, a key product segment for the No. 1 automaker.

Rivals Ford Motor Co (F.N), Toyota Motor Corp (7203.T) (TM.N) and Chrysler LLC all posted sales declines, as industrywide sales extended a slump that took hold in the second quarter.

Among the top six manufacturers, Honda Motor Co (7267.T) and Nissan Motor Co Ltd (7201.T) NSANY.O posted sales gains that were accompanied by higher incentives.

Toyota, which remains on track to overtake Ford as the No. 2 automaker in the United States this year, saw its U.S. August sales fall almost 3 percent.

That marked the second consecutive monthly sales drop for Toyota, the first such decline since early 2003 for the fast-growing Japanese automaker.

"Reduced credit tied to the subprime squeeze challenged consumer confidence this month," Jim Lentz, Toyota's U.S. sales chief, said in a statement.

Toyota still expects U.S. sales growth of between 5 percent and 7 percent this year, even though industry sales are now widely expected to fall to their lowest level since 1998.

Ford posted a 14 percent drop in U.S. sales, a decline in line with cautious Wall Street expectations.

Chrysler LLC said its sales were down 6 percent in its first month as a privately held automaker.

Nissan reported a 6 percent sales increase for August, boosted by stronger results for its flagship Altima sedan, but echoed concerns that a weakening economy was adding to the pressure on the auto industry.

"Something's obviously going on in the industry. Someone who says there's not an impact is probably wrong," Nissan's U.S. sales chief Mark McNabb told Reuters.

Honda's sales were up almost 5 percent, lifted in part by stepped-up incentives intended to clear out inventory of older model Accord sedans in advance of the launch of a redesigned version of the car.

GM CUTS PRODUCTION TARGET

Citing the outlook for a slowing U.S. economy, GM set lower production targets for the second half of the year.

GM, which cut production of its Chevrolet Silverado and GMC Sierra pickup trucks last month, cut its third-quarter production plan by 2 percent and set fourth-quarter production 10 percent lower than a year earlier.

GM sales analyst Paul Ballew said the U.S. economy now appeared on track for growth of less than 2 percent this year and only "modest" improvement in 2008.

"For us, it certainly constitutes a challenging backdrop," Ballew told reporters and analysts on a conference call.

Ford said its sales decline reflected a continuing strategy of throttling back on low-margin sales to rental agencies. That category of Ford's sales fell 44 percent in the month.

Ford also said industrywide results were being hurt by a weaker housing market and an increased wariness about big-ticket purchases, particularly in lower-income households.

"The uncertainty surrounding the current situation is quite substantial," Ford economist Ellen Hughes-Cromwick said on a conference call with analysts and reporters.

Overall U.S. sales of cars and light trucks fell less than 1 percent to 1.48 million vehicles in August compared with a year earlier, according to tracking firm Autodata Corp.

INCENTIVES IN FOCUS

U.S. automakers have said they are keeping inventories leaner and cutting production sooner to avoid fire-sale showroom discounts, but the recent weakness in sales has heightened the focus on incentive programs.

Jesse Toprak, an analyst with auto industry tracking Web site Edmunds.com, expected automakers to step up targeted incentive spending in September, as they work down stock of 2007 models.

"I think we'll see higher levels of spending, but we don't expect a dramatic increase," said Toprak.

Ford said it would begin offering rebates of up to $1,000 on most of its vehicles for September, along with interest-free financing on its market-leading F-150 pickup trucks. Chrysler said it would also extend zero-percent financing offers with details to be announced on Wednesday.

GM's Ballew said the automaker's more aggressive discounts on its competing Silverado trucks were in response to pressure on pricing from rivals, including Toyota's new Tundra.

"It was important for us not to allow competitors to run away on full-size pickups," he said. "We're going to defend that turf."