DETROIT (Reuters) - U.S. auto sales will likely fall again in 2008 due to economic stress on consumers, raising pressure on struggling Detroit automakers to cut prices or use sales incentives, economists and officials said on Tuesday.
By Nick Carey and James Kelleher
DETROIT (Reuters) - U.S. auto sales will likely fall again in 2008 due to economic stress on consumers, raising pressure on struggling Detroit automakers to cut prices or use sales incentives, economists and officials said on Tuesday.
Sales of cars and light trucks in the United States slipped to 16.15 million vehicles in 2007, down 2.5 percent from 2006 and the lowest level in a decade.
U.S. auto executives have been hoping 2008 sales would hold steady, but those forecasts have weakened in recent weeks with most analysts now pegging sales at around 15.5 million.
!ADVERTISEMENT!Speaking to reporters on Tuesday at a Society of Automotive Analysts roundtable on the sidelines of the North American Auto Show here, economists for U.S. automakers began to agree.
"There is a pretty significant risk that we (the auto industry) will have a down year," GM's Ted Chu said at an event sponsored by the Society of Automotive Analysts on the sidelines of the North American Auto Show in Detroit.
Chu is the lead economist at GM's Global Market and Industry Analysis unit.
The top economist at Ford Motor Co <F.N> said the automaker now expects U.S. industry sales to fall to 15.7 million units.
"We think it's quite likely the Fed will ease (rates) further," Ellen Hughes-Cromwick, adding that Ford expects the U.S. Federal Reserve will lower interest rates by a full percentage point to reduce borrowing costs. But she predicted the U.S. economy would grow between 1 and 2 percent this year.
The economists also said automakers are weighing the likelihood of a U.S. government fiscal stimulus package as a way to boost the economy and auto sales.
"During the year we may see a fiscal stimulus package come into play," said Paul Traub, a senior manager for economics and industry analysis at Chrysler LLC.
By cutting production plans for 2008, automakers have already hedged against the risk of a downturn.
Industry tracking service CSM Worldwide expects the rate of annualized U.S. light-vehicle production to fall from 15.5 million units in January to a trough of 12.9 million by March before stabilizing.
In a separate interview at the auto show, GM's head of North American sales, Mark LaNeve, told Reuters that he expects the U.S. auto industry to increase incentives and promotions to maintain sales above the 16 million mark in 2008.
"I think the stimulus will be provided in a very balanced way. I don't see a huge incentive war on the horizon," LaNeve said. "But if the industry starts to raise incentives, we will participate, we will stay competitive to protect our share and keep our dealers healthy."
"I think manufacturers will very logically provide stimulus over time to keep it above 16 million," LaNeve said. "So there might be more pricing pressure to maintain that level."
LaNeve also said he expects there to be more intense competition in the U.S. pickup truck market, where GM faces rivals such as Ford Motor Co <F.N>, Chrysler and Toyota Motor Corp <7203.T> and a housing downturn that has torn into consumer demand for trucks.
(Additional reporting by Jui Chakravorty Das)
(Reporting by James B. Kelleher and Nick Carey; Editing by Peter Bohan)
