U.S. auto sales flat, incentives could hit profit

Mon Mar 3, 2014 3:56pm EST
 
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By Bernie Woodall and Ben Klayman

DETROIT (Reuters) - U.S. auto sales in February finished even with the year-earlier period as hefty incentives to lure customers into dealerships late in the month could not overcome cold and snowy weather.

February's sales fell less than 300 vehicles from last year's 1,193,872 light cars and trucks. While General Motors Co (GM.N: Quote), Ford Motor Co (F.N: Quote) and Chrysler Group all reported stronger-than-expected sales, the higher incentives raised concerns about industry profitability in the future.

The annualized sales rate for the month finished at 15.34 million vehicles, just short of the 15.4 million expected by analysts polled by Reuters. It was the third month in a row that U.S. auto industry sales were weaker than expected.

The frost on sales for January and February will thaw in March as temperatures rise and customers return to showrooms in greater numbers, some industry analysts said.

However, late February's high customer incentives, the discounts to encourage buyers to visit showrooms, will carry over into March, cutting in to companies' profit, several analysts said.

Larry Dominique, executive vice president of industry research firm TrueCar, said there are about 80 days of supply on dealer lots, compared with a more desirable level of 60 to 65 days.

"We have on average two-and-a-half months of supply on dealer lots," said Dominique, adding that most automakers have not cut production, which will lead to even more oversupply, which will increase pressure to raise incentive levels further.

Dominique pointed out that companies book the sales for their balance sheets on the wholesale level, so "every field agent for every manufacturer" is going to press dealers to take more vehicles when they are already oversupplied.   Continued...

 
The General Motors logo is seen outside its headquarters at the Renaissance Center in Detroit, Michigan in this file photograph taken August 25, 2009. REUTERS/Jeff Kowalsky/Files