Will Auto Sales Put in a Floorboard?

For the auto industry, February made January look good.

That is not to say that January was by any means a good month, but both General Motors ( GM) and Ford ( F) said they saw signs that sales were stabilizing.

The supposed trend disintegrated in February, putting future months in question as well. For the month, GM sales dropped 53%, while Ford dropped 48% and Chrysler was down 44%. The seasonally adjusted annual rate of sales was 9.3 million in February, compared with a January rate of 9.8 million and a 10.7 rate in the fourth quarter of 2008, said Ford market analyst George Pipas.

According to J.D. Power & Associates, total light-vehicle sales totaled 655,302 in January and 688,244 in February. The increase reflected a normal seasonal variation, so that the seasonally adjusted sales rate still declined.

"After four months of relative stability in the retail sales pace, the step down in February was concerning for two reasons," said Ford economist Emily Kolinski Morris, on a sales conference call. "First, it was consistent with a renewed downtrend in some of the key economic indicators ... and therefore less likely to represent pure volatility.

"Second, it implies that we did not reach the bottom in terms of the run rate in vehicle sales and pushes that bottom out to some point yet to be determined," Kolinski Morris said.

"It may be this month is now the bottom," she said. "But there's no anchor on the economic horizon to allow us to make that call conclusively." As a result, Ford recently lowered the bottom end of its 2009 sales forecast to 10.5 million units: the top end of the range is 12 million units.

Added GM market analyst Mike DiGiovanni, "The February numbers are clearly a step down from where we've been running the last four months." He pegged the February SAAR rate at 9.2 million and said GM also expects sales in the 10 million to 10.5 million range.

DiGiovanni and GM sales chief Mark LaNeve said it may be useful to view January and February as anomalies, January on the high side and February on the low side. "January started off very strong (but) from the 15th of January until February, you've seen about the same sales pace," LaNeve said.

In a report issued Wednesday, CreditSights analyst Glenn Reynolds said the February numbers "did not offer any respite from the increasingly gloomy macroeconomic data points from record low consumer confidence to rising unemployment.

"The consumer will not consume and the dealer will not stock, so the question remains now whether the new government financial relief program for the securitization markets will have the desired effects quickly enough," Reynolds wrote.

In afternoon trading Thursday, GM shares were up 16 cents to $2.15, while shares in Ford were up 5 cents to $1.86.

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