Glimmer of hope in March's steep auto sales drop

DETROIT — Talk of government loans and bankruptcy and a 37 percent drop in March sales isn't good news, but despite it all, there seems to be a little optimism returning to the U.S. auto industry.

Carmakers' March sales were dismal compared with last year, but consumers lured by record incentives pushed the February-to-March increase above the normal rise that comes at the end of winter.

"Maybe we'll get — imagine that — some momentum going," said Mike DiGiovanni, executive director of global market and industry analysis for General Motors Corp., whose 45 percent sales decline last month was the worst among the major automakers.

Americans bought 857,735 new vehicles in March, compared with 1.36 million in the same month a year ago, Autodata Corp. said Wednesday. But sales jumped nearly 25 percent from February, beating the typical increase of about 20 percent and increasing optimism that the worst may be over for an industry battered by the global recession and bad publicity about GM and Chrysler's financial woes.

The carmakers are counting on more people like Richard Bolton, a Houston police officer who lives in suburban Livingston, Texas. Discounts amounting to $8,500 lured him into signing papers to buy a four-door Jeep Wrangler on Tuesday from River Oaks Chrysler-Jeep.
"I know they're not selling too many cars, and I've got a stable job," said the 26-year veteran patrol officer. He bought the Jeep, with a sticker price of $29,990, "probably to get more discounts and rebates and the employee price."

The average incentive on vehicles sold last month was $3,169, up 30 percent from a year earlier and a record high for the industry, according to the auto Web site Edmunds.com.

A good deal also reeled in Catherine Crawford of Newton, Mass., who on Wednesday bought her first car in about 12 years, a Toyota RAV4 small crossover vehicle.

Like many buyers, the researcher for a private federal contractor held off on her purchase for as long as she could.

"We are very careful with our money, and we've been saving for a while, so we sort of knew that we have to buy a car in the next couple of years," she said. "Basically now seemed like the right time to do it."
An added incentive was the new federal tax deduction for car sales and excise taxes, but price was the big factor — only $3,000 more for a new vehicle compared with a used one, she said.

On a conference call with reporters and industry analysts, GM's Digiovanni said most automakers finished March stronger than expected, and he believes the market is "bouncing around the bottom here."

Tight credit, which some automakers said cost them 20 percent of their sales, started to loosen during the month. GM's financial arm, GMAC Financial Services, said Wednesday it would lower minimum credit score requirements for auto loans.

Bob Carter, head of the Toyota brand for Toyota Motor Sales USA, said the industry is in a "bottoming process." While Toyota's sales fell 39 percent compared with a year ago, the daily selling rate increased from February, he said.

There is "a very early indication that we have floored, and there's some optimism starting to return to the market," he said.
Dearborn-based Ford Motor Co.'s sales dropped 41 percent, but its economist, Emily Kolinski Morris, also saw signs that the economic decline was moderating in March. February was the worst sales month in 27 years.

Housing industry metrics improved in February, and consumer confidence has started to stabilize, she said.

"Based on past performance, these indicators would point to some improvement in the vehicle sales pace in roughly three months' time," she said. "We recognize that changes in economic indicators are likely to be ambiguous in the early stage of a recovery and mixed signals may still be a precursor to more consistently positive ones."

Chrysler LLC saw sales fall 39 percent for the month, and it's facing a 30-day government deadline to partner with Fiat Group SpA or go out of business. But its executives were optimistic because the Auburn Hills, Mich., company sold more than 100,000 vehicles for the first time since last fall.

Honda Motor Co., which on Tuesday cut North American production and offered buyouts to workers, saw a 36 percent sales drop in March, while Nissan Motor Co.'s sales dropped 38 percent.
Bankruptcy talk and rejection of restructuring plans by the government have hurt GM's image, DiGiovanni conceded. But GM research shows individual brands, he said, have not been tarnished by the parent company's troubles.

"The GM brand gets dinged big-time in terms of considering a GM vehicle when you use the word, the umbrella corporate GM," he said. "But when you look at Chevrolet, Cadillac, or other brands, they haven't changed. So the GM brand is taking the beating, being the shield."

While GM has until June 1 to restructure under the threat of bankruptcy, the government is backing new warranties on GM and Chrysler vehicles to help put buyers at ease.

Joe Barker, senior manager of North American vehicle sales forecasting for the CSM Worldwide consulting firm in Northville, Mich., said the first quarter was the trough in auto sales. He predicted gradual improvement for the remainder of the year.

But he said the industry is still selling at an annual rate that's 1 million units below the fourth quarter and 6 million less than a year ago.
"Though there are encouraging signs out there, we are not yet through the woods," he said. "We are in once-in-a-lifetime territory right now, and it's going to take a little while before we bounce out of it."

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Associated Press Writers Rodrique Ngowi in Boston and Juanita Cousins in Nashville, Tenn.; and AP Auto Writers Kimberly S. Johnson in Detroit, and Dan Strumpf and Bree J. Fowler in New York contributed to this report.