June 1, 2012 / 2:08 PM / in 6 years

UPDATE 5-US May auto sales disappoint; demand slows

* GM, Toyota, Chrysler, Honda, Nissan sales fall short of
expectations
    * Sales rate for May finished at 13.8 mln vs expected rate
of 14.5 mln
    * Economic indicators "a little softer" than Q1 -Ford
economist
    * Underlying trends remain positive for industry -VW exec

 (Adds final sales numbers, updates stock prices)	
    By Ben Klayman and Deepa Seetharaman	
    DETROIT, June 1 (Reuters) - Automakers posted strong U.S.
May sales gains from a year ago, but the sales rate still fell
short of expectations as the broader economy softened and gave
pause to consumers mulling  big-ticket purchases.	
    The annual selling rate in May finished at 13.8 million
vehicles, the first month this year under the 14 million pace
and far short of the 14.5 million expected by economists polled
by Reuters.	
    The sales results, when combined with Friday's anemic U.S.
jobs report, suggested the industry could face hurdles in its
recovery from a recession four years ago that dragged General
Motors and Chrysler into bankruptcy. Among the automakers
posting disappointing results on Friday were GM, Toyota Motor
Corp and Chrysler. 	
    "Obviously, the economy's probably slowing a touch," said
Gary Bradshaw, a portfolio manager with Hodges Capital
Management, which owns Ford shares. "I still think that car
sales will continue to improve from last year, but it's going to
be a struggle. There are plenty of headwinds in front of us." 	
    Honda Motor Co Ltd and Nissan Motor Co Ltd 
also posted weaker-than-expected sales in May, while Ford Motor
Co's numbers fell short of what Barclays and Edmunds.com
had forecast. Honda, Nissan and Ford's sales rose 48 percent, 21
percent and 13 percent, respectively.	
    GM's sales rose 11 percent, while those at Chrysler and
Toyota rose 30 percent and 87 percent, respectively. 	
    The U.S. industry's overall sales in May finished up 26
percent at 1,334,600 cars and trucks, but the rate at which
vehicles were sold translated to an annual pace that was a step
down from the 14.4 million recorded the prior two months.	
 	
    "Since our last monthly sales call over the last 30 days or
so, the economic indicators came in just a little softer than in
the first quarter," Ford senior economist Jenny Lin said on a
conference call.    	
    Some analysts and industry officials have said the lower
rate was partly due to the warmer-than-expected weather earlier
in the year that drew buyers into dealer showrooms, pulling
sales from the spring shopping season. In addition, falling
prices at the fuel pump have reduced pressure on consumers to
get rid of gas-guzzlers and buy more fuel-efficient cars.	
    Auto sales have been one of the bright spots in the economy
for several months and the monthly sales results offer an early
snapshot of consumer demand. 	
    	
    SHAKY RECOVERY	
    Sales have shot up this year despite cooling consumer
confidence and mixed economic data that illustrates how shaky
the recovery has been over the last three years. On Friday, the
U.S. Labor Department reported job growth in May that was the
weakest in a year, and employers added far fewer jobs in the
prior two months than previously reported. 	
    On Tuesday, the housing recovery gained traction as U.S.
home prices edged higher for the second month in a row, but
consumer confidence cooled in May to its lowest level in four
months as Americans turned gloomy again about the economy.
 	
    "During any recovery you see some signals pointing upward,
some neutral, some down," said Jonathan Browning, head of
Volkswagen AG's U.S. operations. "While there'll be
some short-term fluctuations in those indicators, those
underlying trends remain in a positive direction." 	
    One factor fueling the growth in auto sales has been
Americans' increasing need to replace their aging cars and
trucks, which are now a record 10.8 years old on average. 	
    "The economy will continue to grow slowly and absolutely
pent-up demand will be a strong force and will overcome maybe
some of the volatility," GM's U.S. sales chief, Don Johnson, 
said on a conference call. "But the economy has to keep growing
at a positive rate for pent-up demand to be released."  	
    Higher fuel prices in the first quarter prompted some
consumers to swap older, less fuel-efficient models to lock in
fuel savings. According to Swiss bank UBS, 63 percent of dealers
said higher gasoline prices increased demand in the first
quarter.	
    With gas prices falling again, the pace of new-car sales may
moderate in the second and third quarters, but the underlying
consumer appetite for new cars and trucks as a result of pent-up
demand remains strong, UBS analyst Colin Langan said.	
    GM's May sales increased to 245,256 vehicles from 221,192 in
the same month last year. 	
    Ford's sales rose to 216,267 vehicles from 192,102 in the
same month last year as the No. 2 U.S. automaker boosted
consumer incentives by more than 9 percent from the previous
month according to Edmunds. Incentives in the overall industry
rose almost 4 percent from April to May to $2,135 per vehicle.	
    Ford also said it plans to build 690,000 vehicles in the
third quarter in North America, up 5 percent from the same
period last year.	
    Toyota sales rose 87 percent to 202,973 vehicles. Sales at
Chrysler, controlled by Italy's Fiat, rose to 150,041
vehicles from 115,363 in the same month last year. 	
    GM shares were down 1.7 percent at $21.80 late on Friday
afternoon after falling as much as 3.4 percent earlier in the
session. The stock pared losses after the automaker announced
two moves to slash 24 percent of its U.S. pension obligations.
 	
    Meanwhile, Ford shares were down 4.5 percent at $10.08. Wall
Street stocks were broadly lower on the sour U.S. jobs report.	
	
 (Additional reporting by David Bailey; editing by John Wallace,
Sofina Mirza-Reid and Matthew Lewis)

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