February auto sales tumble, Detroit hit hardest

By Ben Klayman and Kevin Krolicki

DETROIT (Reuters) - U.S. auto sales tumbled in February in the face of a slumping economy and high gas prices with double-digit declines by all three struggling Detroit-based automakers.

Sales at General Motors Corp(GM.N), Ford Motor Co (F.N) and Chrysler LLC CBS.UL fell 16 percent, 10 percent and 17 percent, respectively. GM and Ford responded with cuts to second-quarter production plans, while Chrysler rolled out a new program of sales incentives.

"February was a very disappointing month for industry sales," GM Vice Chairman Bob Lutz told Reuters at the Geneva auto show. "We still expect the economy to recover in the second half. Our crystal ball is not that much better than anybody else's."

Japan's Honda Motor Co Ltd (7267.T) was the only major automaker to buck the downturn with an increase of nearly 1 percent. Toyota Motor Corp (7203.T) and Nissan Motor Co Ltd (7201.T) reported declines of 6.6 percent and 3 percent, respectively.

Auto sales represent one of the first snapshots of overall U.S. consumer demand, and the weakness in February results could provide more evidence for those who believe the U.S. economy has already slipped into recession.

GM's results were at the bearish end of analysts' expectations due to weaker demand for trucks such as the Chevrolet Silverado and Chevy Tahoe. GM said it would cut second-quarter production by 5 percent from year-ago levels.

Ford said it would cut second-quarter production by 10 percent due to weaker demand for its market-leading F-Series full-size pickups and SUVs like the Explorer and Expedition.

Ford also said it would eliminate shifts at four U.S. plants and lay off some 2,500 workers -- or almost 5 percent of its remaining work force -- as part of an effort to cut costs and return to profitability next year.

Chrysler's sales were hurt by lower demand for its Jeep SUVs, as well as its Ram pickup truck and minivans.

Sales numbers were adjusted for an additional selling day in February compared with a year earlier.

CALLING THE BOTTOM

"It would be premature, certainly, to conclude that either the economy or the industry have reached bottom yet, but we are doing our best to maintain a steady hand on the wheel as we navigate through this current down cycle," Ford economist Emily Kolinski Morris said on a conference call.

She added that Ford, the No. 3 automaker by sales in the U.S. market now behind Toyota, expects U.S. economic growth this year of about 1.5 percent.

The overall industry's U.S. February sales fell 10 percent with an annualized selling rate of 15.36 million vehicles.

Analysts expect industry-wide 2008 U.S. auto sales to extend a downturn that accelerated in the second half of last year, reflecting the slumping housing market, higher gas prices and tighter credit. Some industry observers have even predicted a 15-year low for sales this year below 15 million vehicles.