DETROIT Major automakers reported their best U.S. sales month in six and a half years in November as aggressive discounting and the continued popularity of big pickup trucks helped trounce Wall Street forecasts.
The industry's annual U.S. sales pace reached 16.41 million vehicles last month, the best monthly showing since February 2007, according to industry research firm Autodata. This handily beat expectations for a rate of 15.75 million.
Yet shares of General Motors Co (GM.N) and Ford Motor Co (F.N) slid more than 3 percent as some investors worried that the discounts signaled a return to the unhealthy practices that eroded industry profits in the years before the global recession of 2009.
Other investors also fretted that consumers' need to replace aging vehicles, which propelled U.S. light vehicle sales after the recession, would not support the current pace of sales gains in 2015 and beyond.
"The sales rate for cars increased so dramatically in the last several years," said Jesse Toprak, an analyst with research firm Truecar.com. "The fear might be that it's not going to hold up beyond next year." But Toprak said he does not share this view.
November U.S. auto sales rose 8.9 percent, beating the year-to-date increase of 8.4 percent.
Manufacturers provided incentives averaging more than $2,500 per vehicle in November, TrueCar.com said. Automakers began offering aggressive deals in the second half of the month to take advantage of Black Friday shopping following Thanksgiving Day on November 28.
Jonathan Browning, chief executive of Volkswagen of America (VOWG_p.DE), said the industry was "super aggressive" in the run-up to and through the holiday weekend.
Incentives were particularly heavy in the midsize sedan segment, which includes Toyota Motor Corp's (7203.T) Camry and Honda Motor Co's (7267.T) Accord, several executives said.
The discounts "seemed to spark some investor concern about discipline," Citi analyst Itay Michaeli said in a research note.
"While we recognize that price gains are less balanced than they were a year ago and that recent pressures need to be monitored, the overall numbers remain solid," Michaeli said.
In interviews and conference calls, auto executives disputed concerns that the industry was overly reliant on incentives to spur sales in November, which was the strongest U.S. sales month of 2013.
"This is not a purely incentive-fueled industry right now," GM's North American chief, Mark Reuss, said. "It's not."
GM shares were down 3.3 percent to $37.81 while Ford shares were off 3.2 percent to $16.52, while the broader S&P 500 index was off 0.6 percent.
On the same day the industry posted its strong results, a federal judge ruled the city of Detroit, once the cradle of the auto industry and now a symbol of urban decay and mismanagement, was eligible for bankruptcy.
Executives and analysts said the Detroit automakers were unlikely to revert to offering outsized incentives. Those unhealthy practices were a factor in GM and its smaller U.S. rival Chrysler Group LLC taking federal bailouts in 2009 to survive.
"I personally think the industry as a whole learned a lot of valuable lessons in 2008 and 2009," said Fred Diaz, who leads Nissan Motor Co's (7201.T) day-to-day U.S. operations
The automakers "are doing a really good job keeping inventories in line," said Diaz, a former Chrysler executive.
U.S. vehicle sales bottomed in 2009 at 10.4 million. They rose to 14.5 million last year, and GM has said U.S. auto sales would likely finish at 15.6 million this year.
Monthly sales are regarded as an early indicator of the U.S. economy's health. The auto industry has held up better than the broader economy because of easier access to credit and consumers' need to replace aging vehicles. The average vehicle on the road in the United States is more than 11 years old. However, Toyota's North American head, Jim Lentz, forecast last month that pent-up demand to replace aging vehicles will slow.
GM emphasized that it was disciplined in its approach to incentives. Executives at the U.S. automaker said incentives as a percentage of average vehicle prices held steady at around 10 percent during the first nine months of the year.
Ford said the midsize car segment accounted for 14.5 percent of the industry last month, down one percentage point from November 2012. The second-largest U.S. automaker also said the weak yen allowed Japanese automakers to offer deals.
"We have started to see in the industry some top-line pricing actions on some of the vehicle lines, such as hybrids and midsize sedans, by some of the individual Japanese (automakers) probably that could be related to the weakening yen," said John Felice, Ford vice president of U.S. marketing and sales.
The three Detroit automakers and two of Japan's top three reporting year-to-year increases on Tuesday. Honda was alone among major automakers in reporting flat sales and missing analyst estimates.
Chrysler, now a unit of Fiat SpA FIA.MI, said its November sales leapt 16 percent, while GM reported a 14 percent jump. Ford sales rose 7 percent. Sales rose 10 percent at Toyota and 11 percent at Nissan.
Big trucks were the best-selling vehicles at each of the Detroit automakers.
Ford's industry-leading F-series pickup outsold all of the company's passenger cars combined, rising 16 percent to 65,501. Combined sales of GM's Chevrolet Silverado and GMC Sierra were up 15 percent at 48,748. Chrysler's Ram pickup gained 22 percent to 29,635.
Meanwhile, in the race for bragging rights as biggest seller of luxury vehicles, Daimler's (DAIGn.DE) Mercedes brand after a 13 percent sales increase in November holds a lead of more than 7,600 vehicles over BMW (BMWG.DE).
(Reporting by Ben Klayman and Deepa Seetharaman in Detroit; Writing by Paul Lienert; Editing by Maureen Bavdek, Jeffrey Benkoe and John Wallace)