U.S.-Built Car Sales Slip in Early August

DETROIT — Sales of U.S.-built cars in early August dipped 7.6% from last year’s strong pace, domestic auto manufacturers reported Monday.

But auto industry analysts cautioned that the year-to-year comparison meant little, since sales were inflated during the same period of 1987 by broad incentive programs designed to reduce large inventories of unsold cars.

“We’re getting into the period where they were having very heavy incentives a year ago,” said David Healy, an auto analyst with the investment firm Drexel Burnham Lambert. “I think the year-to-year comparisons will be misleading in the next (several) periods. You’re comparing a year-ago period that was artificially inflated by incentives. You haven’t got any (incentives) this year.”

The decline in domestic auto sales was led by General Motors, which dropped 15.9%. Ford reported a softer sales decline of 6%. Chrysler, however, said its sales rose 22.3%.

Auto analysts said GM benefited the most from incentive programs a year ago and thus suffered the most by comparison. They noted that GM’s share of the domestic market, excluding imports, declined to 48.9% during the first 10 days of August from 53.8% in the same period last year.

Sales of domestic vehicles built by foreign-based firms held their own in the period. Honda’s sales of its U.S.-built Civic and Accord models rose a scant 0.6%, while sales of Nissan’s Sentra models rose 19.9% and Toyota’s Corolla sales jumped 34.9%.

Selling Rate Is Key

The seasonally adjusted annual selling rate--the number of cars that would be sold if the period’s pace were to continue for a full year--was a strong 7.8 million units in early August. Some analysts cautioned, however, that higher interest rates would deflate the sales pace in the near future.

“The story is that the decrease doesn’t mean anything,” said Christopher Cedergren, an auto analyst with J. D. Power & Associates, a Westlake Village automotive market research firm. “What is really relevant is the seasonal selling rate. . . . Inventories were out of control last year, (and) manufacturers launched incentive programs to clean the decks.”

Theodore Sullivan, an auto analyst with the WEFA Group, an economic forecasting firm in Bala-Cynwyd, Pa., insisted that the sales figures represented a strong performance, a sign that consumer confidence remains high. Yet he isn’t sure how long that will last.

“You have to expect the selling rate to come down. . . . Interest rates are rising,” Sullivan said. “There are a lot of folks who bought a home on an adjustable-rate mortgage. . . . When consumers get their (new mortgage payments) figured out, they will find that they are going to have to pay more. Then they will have to curtail anything else.”

AUTO SALES Percentage changes in auto sales for the first 10 days of August are based on daily rates rather than total sales volume. There were nine selling days in the current period and eight in the year-ago period.

August % 10-Day 1988 change GM 86,676 -15.9 Ford 52,239 -6.0 Chrysler 24,167 +22.3 Honda U.S. 9,531 +0.6 Nissan U.S. 2,961 +19.9 Toyota U.S. 862 +34.9 Mazda U.S. 709 -- TOTAL 177,145 -7.6

*Estimate