Housing market ills compound lax auto sales
At NY International Auto Show, GM and Chrysler report soft demand, while troubles in housing, credit markets could affect automakers, especially Ford, in truck sales.
April 4 2007: 5:26 PM EDT
NEW YORK (Reuters) -- Ford Motor Co. could take the biggest hit among automakers from weakness in the housing and credit markets, its North American operations head said, because of its dominance in the market for pickup trucks, the staple vehicle of the construction industry.
No immediate upturn in industry auto sales is in sight, Ford's (Charts) Mark Fields also told reporters at the New York International Auto Show Wednesday, amid mixed signals coming from the U. S. housing market.
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Weak housing starts have hurt sales of pickup trucks, typically purchased by construction workers.
"When you look at the pickup truck segment, because we are a leader there, because that is the segment it most impacts, we could have the biggest impact," said Fields, answering questions on the slowdown in the U. S. housing market.
"It's not so much the subprime, it's overall what's happening in the housing industry," he specified. "We're not banking on any huge upticks in the industry, we're going to monitor the situation month to month. "
Big Three sales slide continues
Tuesday, Ford reported a 15 percent drop in monthly sales of its market-leading F-Series pickup trucks, in a generally poor month for U. S. automakers.
The crisis in the risky subprime lending segment has not directly affected Ford so far, Fields said, but could if it spreads to the broader market.
"We haven't seen customers explicitly say, 'Oh my gosh, I've seen equity in my house go down 20 percent, so therefore I'm not going to buy a car,'" he observed.
"The worry is what happens if the subprime issues roll over into the general market, which then can really bring the housing segment down, and then at a certain point it would become a problem. "
GM sees softer sales as well
General Motors Corp. 's (Charts) head of North American operations also said he expects second-quarter sales to be softer than initially forecast due to weaker overall industry conditions than GM had anticipated.
Speaking on the sidelines of the New York International Auto Show, Troy Clarke said the company is scaling back production on some cars and midsize sport utility vehicles to cope with softer demand.
"We thought the market would be stronger," he said.
The automaker plans to offer strategic incentives on several products this summer, including its line of newly redesigned pickup trucks, Clarke said.
Chrysler on track despite worries
Top Chrysler Group executives said the automaker's sales and product lines are on track despite the distractions of a possible sale by German parent DaimlerChrysler AG (Charts).
DaimlerChrysler acknowledged for the first time earlier Wednesday it was talking with prospective buyers of its loss-making Chrysler Group unit but did not identify the bidders or commit itself to a sale.
"It would be foolish for me to say it doesn't have any effect whatsoever," said Steven Landry, vice president of sales and field operations for Chrysler, in an interview at the auto show. "It certainly does, but it's a very unique and hopefully not a frequent situation to have. "
Landry said that despite an 8 percent dip in March sales, Chrysler still hit its internal monthly sales target last month, and it was working to allay concerns among its dealers.
"The brands aren't changing, the products aren't changing," said Landry. "Our good dealers understand that we'll be selling Chrysler, Dodge and Jeep for an awfully long time. "
Frank Klegon, Chrysler's executive vice president of product development, said the situation had not so far affected its development of new cars and trucks.
"There's always a little anxiety from a personal level," said Klegon, in an interview, also at the auto show. "The good news from the product side is that the product plan is intact. There's a lot of future there. "
He declined to say whether he would prefer Chrysler to be taken over by another automaker, or private equity interests, which sources close to the situation have said are front-runners in the bidding for Chrysler.
"What I look for is a partner that'll continue, on a long-term basis, to invest and promote this business and make Chrysler stronger," he said.
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