March 27, 2009 / 11:36 PM / 9 years ago

Auto sales seen plunging again in March

DETROIT (Reuters) - Auto sales likely slogged at the weakest monthly rates in more than 27 years in March and show few signs of life, adding to the pressure on General Motors Corp, Chrysler and Ford Motor Co.

The Detroit-based automakers and the three top-selling foreign carmakers all are expected to post severe U.S. sales declines in March from a year earlier with the nation engulfed in a deep recession.

Overall, the seasonally adjusted annual rate of sales, a key measure for gauging the strength of consumer demand, is expected to come in at 9.2 million cars and light trucks in March, according to a Reuters poll of 31 economists.

That would be up slightly from the 9.12 million February rate, the worst mark since December 1981, but a 40 percent drop from a year earlier. Some of the most influential analysts expect a March rate at 9 million vehicles or less.

“It gets back to the consumer and we don’t see the consumer indicating the level of confidence that is needed to get a higher number than that,” IHS Global Insight analyst Rebecca Lindland said in an interview.

U.S. auto sales typically account for as much as one-fifth of all retail sales and the sales figures are one of the earliest indicators of demand every month.

Global Insight expects a sales rate of 9 million units in March and 9.2 million for the first quarter. It expects the rate to fall to 9 million units in the second quarter, putting more pressure on turnaround plans for GM, Chrysler and Ford.

For GM and Chrysler, operating under $17.4 billion of emergency government loans and seeking up to $22 billion more, a full year at those selling rates would force them to ask for even more aid, according to their viability plans.

At Ford, which has not sought a government bailout, those results would also test its ability to ride out the worst-case scenario it has said it could weather without federal aid.

U.S. auto sales were down 39 percent overall through the first two months of 2009 from a year earlier. Analysts expect the top six selling automakers to post percentage losses of at least that much for March.

GM, Ford and Chrysler could post declines in the 40 percent to 50 percent range, according to analysts, while Toyota Motor Corp, Honda Motor Co Ltd and Nissan Motor Co Ltd may fare slightly better than that.

“The story of the industry continues to be a widespread reluctance to purchase durable goods, amid weak consumer confidence and rising unemployment,” Barclays Capital analyst Brian Johnson said in a note to clients on Thursday.

Barclays sees a softening in the retail sales rate from February “casting doubt once again on where the floor could be for the industry’s downturn, absent any direct stimulus from the government,” Johnson said.

Deutsche Bank expects an 8.6 million sales rate. Among other influential forecasters, J.D. Power and Associates, which tracks sales on a daily basis, expects a 9.2 million unit rate.

Barclays Capital and J.P. Morgan both forecast a selling rate of 8.8 million units for March, while Edmunds.com expects an 8.9 million rate.

Erich Merkle, an independent industry analyst from Grand Rapids, Michigan, said he expected March sales to be abysmal, but believes government plans to buy up toxic assets and push down mortgage rates may support sales over the longer term.

“I still believe that we will see improvement in the second half of the year,” he said. “There is pretty encouraging evidence that our economy is bottoming.”

Reporting by David Bailey; Editing by Bernard Orr

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