Carmakers' August sales drop, but some hope seen

By Poornima Gupta

DETROIT (Reuters) - Detroit automakers' sales declined by 20 percent to 34 percent in August, but aggressive discounts and lower gas prices helped the battered industry do better than many Wall Street analysts had feared.

General Motors Corp and Ford Motor Co on Wednesday cut second-half production targets, likely putting a drag on their results, but held out hope that the near-freefall in sales seen in the summer had slowed somewhat in August as consumer confidence steadied.

"We're very encouraged by what we saw in August, and it gives us reason to think we're pulling our way out of this thing," said GM's sales and marketing chief, Mark Laneve. "Hopefully, we will start scratching our way back to numbers that are improving on a month-on-month basis."

August sales marked the 10th straight month of declining sales in the U.S. auto market, making it the longest such downturn since the 2001 recession.

While GM's August sales fell 20.4 percent, that was better than analysts had feared as the automaker received a boost from its employee-pricing discount program.

Among other major players, Chrysler LLC's sales plunged 34 percent, Ford's tumbled 26.6 percent, Toyota Motor Corp's fell 9.4 percent and Honda Motor Co's slid 7.3 percent.

All was not gloomy, though. Nissan Motor Co Ltd surprised investors with a 13.6 percent increase in August sales.

GM and Ford shares rose on the results. GM ended up 5.8 percent, or 62 cents, at $11.27 on the New York Stock Exchange after touching an intraday high of $11.57. Ford closed up 1.3 percent, or 6 cents, at $4.57.

U.S. auto sales fell 15.5 percent to 1.25 million units or to a seasonally adjusted, annualized rate of 13.72 million units in August. That was sharply down from a 16.3 million rate of a year earlier, but up from the 16-year low of 12.55 million in July, according to AutoData Corp.

BOTTOM SEEN?

Jesse Toprak, analyst at auto industry tracking firm Edmunds, said the market may have hit a bottom in July.

"Bad news is we're still down from a year ago, but the good news is that we saw some improvements over the last couple of months thanks to a combination of lower gas prices and incentive spending," he said.

While automakers said the month-to-month improvement was encouraging, they cautioned that the second half of the year will not be an instant return to times of plenty.

Toyota said it was "guardedly optimistic" that August sales showed that the worst of the downturn had passed.

"We see it as an improvement over July, a marginal improvement," Toyota spokesman Irv Miller said. "There's not really a lot of reason to go running down the street with balloons and flags, because there are a lot of issues out there."