Consumers encouraged by promising economic signs headed back to dealer showrooms last month, but sales sputtered in late June as prospective buyers waited for the government to introduce its cash-for-clunkers incentives.
June's selling rate slipped below the pace in May and was down sharply from last year, but auto executives said Wednesday that the market had begun a gradual recovery, supported by strengthening consumer confidence.
"The tide seems to have shifted in recent weeks, with more indicators improving than receding," said Emily Kolinski Morris, an economist at Ford Motor Co.
Ford, the only U.S. automaker not relying on federal rescue loans, recorded the best sales performance among the top six players in the market and reclaimed the No. 2 ranking from Toyota Motor Corp.
Ford's sales were down 10.7 percent from last June, compared with an overall market decline of 27.7 percent. Its market share rose to 18 percent, a 3.4 point surge.
"It's hard to isolate whether that's coming from others' trials and tribulations, but we suspect that most of the improvement is coming from our own new products," said Jim Farley, group vice president of marketing at Ford, which has increased its production plans for the third quarter.
General Motors Corp.'s sales fell 33.4 percent in its first month in bankruptcy, and Toyota's sales plunged 31.9 percent.
With GM's 20.3 percent share of the market expected to shrink by four points after it cuts half of its brands, GM, Ford and Toyota will be locked in a three-way fight for dominance of the U.S. market as it recovers.
"We'll have four brands, they'll have three," said GM's global sales analyst Mike DiGiovanni. GM and Ford will have roughly the same number of U.S. dealers after GM completes its restructuring. "There wouldn't be any natural reason why we should be that far ahead of them" in sales, he said. "But if we're printing money here, I don't care what the relationship between Ford and ourselves is."
Compared with Ford, which benefited from strong fleet sales, GM's results reflected a sharp decline in its fleet business related to its plant shutdowns. Sales among its brands varied too, as dealers going out of business and dealers with brands slated for elimination offered generous deals to clear out showrooms.
Some of GM's fleet customers held off sales because of the bankruptcy process. "But they have assured us that they'll come back into the market with us," said GM Vice President Mark LaNeve.
Individual consumers do not appear to have shunned GM brands. "The idea that consumers are not going to buy from a bankrupt company is simply not true," said Jesse Toprak, market and pricing analyst at online research firm Edmunds.com.
GM executives cautioned, however, that consumer sentiment could change if the automaker's best assets -- the New GM -- do not emerge fast from bankruptcy.
Chrysler Group LLC, the new company formed by the merger of Chrysler and Fiat SpA's auto business, reported a 41.9 percent sales drop in the worst showing among the top six players.
In the first half of 2009, the market contracted 35.1 percent to 4.81 million cars and light trucks, according to Autodata Corp.
Most automakers expect annual sales of 10 million vehicles or more, depending on the results of the cash-for-clunkers program set up by the government to stimulate demand for cleaner and more fuel-efficient vehicles.
"Clearly, it's going to be good for the industry but it may have caused sales to weaken in the last part of the month," DiGiovanni said, citing reports from dealers.
For most of the month, June's selling rate was tracking above 10 million cars and trucks on an annual basis, but the final result was 9.69 million, slightly below May's rate of 9.91 million.
That is a significant improvement over the first quarter, but auto executives cautioned that the industry still faces many difficult months. "Now 10 million doesn't sound so bad, but it's worth reminding ourselves that that's still 40 percent below most of the sales achieved this decade, at least until 2007," said Ford market analyst George Pipas.
Forecasters do not expect the market to recover to the 16 million level of 2007 for several years. Edmunds.com expects sales to rise next year to 12.4 million cars and light trucks. But it will take three to five years before they reach the 14.5 million to 15 million range, Toprak said.
Auto executives said demand was strengthening faster in some regions of the country, such as the central states, but remains weak in others. "The overall market in the West Coast, California in particular, is far and away the weakest of our five regions," GM's DiGiovanni said.
That has hurt Toyota, the biggest player in California with nearly one-fourth of the market.
Toyota's poor results may reflect its reluctance to increase discounts, Toprak said. According to Edmunds' estimates, Toyota's incentives averaged $1,362 per vehicle, compared with $1,686 at archrival Honda Motor Co., which normally offers lower incentives than Toyota.
Among Detroit's automakers, GM and Ford discounts averaged nearly $3,600 while Chrysler's exceeded $4,800.
The South Korean Hyundai-Kia group outsold Nissan Motor Co. in the first half of 2009. Building on its campaigns to offer consumers value and security, Hyundai said Wednesday that it would offer a year's worth of gas at $1.49 a gallon -- guaranteed for the first 12,000 miles.