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May Auto Sales: Another Sign Of A Stalling Economy
Jun. 1 2011

Automakers reported weak car sales for May on Wednesday, with only Chrysler posting gains among the largest market participants. A slowing economy, with unemployment and gas prices remaining stubbornly high, along with supply chain disruptions in Japan, conspired against major automakers in May.

Chrysler was the star of the show. After having recently repaid large chunks of bailout money to the Federal government, with CEO Sergio Marchionne announcing they would be progressively increasing their stake, Chrysler grew its May sales 10% from a year ago to 115,393. Marking its best May sales since 2008, the company derived most of its sales from new models, including the 2012 Fiat 500.

General Motors had a slow May, with sales falling 1.2% to 221,192 on weaker fleet deliveries. Retail sales recorded a healthy 9% increase, but a 16% drop in fleet deliveries due to a 21% fall in rental volumes was enough to tilt the balance, sending sales into the red for the largest U.S. automaker.

Ford suffered a similar fate to GM, with U.S. sales ticking down 0.1% to 192,102. The company saw a big drop in government sales (-9%) which was enough to counteract a 5% retail gain. While demand for light, fuel efficient vehicles was on the rise, Ford actually sold fewer trucks this May, evidencing a clear shift in consumer preferences.

Toyota, the large Japanese automaker, has been on a free fall ever since the recent tsunami battered Japanese shores. Sales plummeted, falling 33.4% to 108,387 from a year ago. “Uncertainties about [the] production forecast” have troubled the automaker as it struggles to get its manufacturing and supply teams back online. Japanese production is expected to be at about 90% of normal levels in June.

Like many other sectors of the economy, carmakers are feeling the heat. With unemployment remaining stubbornly high, a massive inventory of homes stuck in the foreclosure pipeline of many big banks, and gas prices pushed up by record oil and commodity prices, economists are beginning to revise their economic forecasts and are questioning how much longer the consumer can continue to bear the current environment.

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