Detroit automakers face speed bumps as sales growth slows

Sun May 3, 2015 8:31am EDT
 
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By Paul Lienert and Joseph White

DETROIT (Reuters) - Detroit's automakers, on track for their best sales year since 2006, may want to brace themselves for rockier times ahead.

    Auto executives say the industry is as healthy as it's been since being restructured in 2009. But judging by the recent stock performance of General Motors Co, Ford Motor Co and Fiat Chrysler Automotive, investors have a less robust view.

    Over the past year, GM and Ford share prices have lagged the overall market, in spite of moves by those two companies to give more cash back to shareholders. Fiat Chrysler prices plunged last week as Chief Executive Sergio Marchionne made increasingly overt efforts to drum up interest in a merger with one of his rivals.

    "The party may be starting to wind down," said Charles Chesbrough, senior principal economist for IHS Automotive. "We're still looking at a good couple years of strong demand, but the days of big sales increases are behind us."

    Optimists include Kurt McNeil, head of GM's U.S. sales operations, who said Friday that the industry is on track to have its best sales year since 2006. U.S. sales of cars and light trucks are estimated to reach 17 million in 2015, compared with about 10 million in 2009.

    U.S. consumer confidence is up, house prices are recovering and gasoline costs less than $4 a gallon in most parts of the country, supporting sales of the big trucks and SUVs that drive profits for the Detroit Three, just as they did before the financial crisis crash in 2008-2009.

   But there are warning signals. Sales growth is slowing in the home market, demand for small cars and family sedans is falling, revenues have declined, profits outside North America and China are virtually nonexistent and share prices have flattened.

    All three Detroit automakers missed analysts' expectations for first-quarter earnings. After reporting healthy April U.S. car sales on Friday, stocks fell again at all three.   Continued...

 
A large 'Buy American' sign, in support of Detroit's auto industry, is seen in the back of an auto scrap yard in Detroit, Michigan May 18, 2009.