DETROIT -- Falling consumer confidence and the Presidents Day weekend snowstorm that blanketed much of the East Coast put a chill on U.S. car and light-truck sales in February, analysts said.
Automakers are expected to report on Monday a slight drop in light-vehicle sales to a seasonally-adjusted annual rate between 16.1 million and 16.4 million vehicles, down from 16.5 million in February last year, according to a survey of eight industry analysts.
"Sales started off the month pretty slowly and then the Northeast obviously got banged by the storm," said Domenic Martilotti, an analyst with Bear, Stearns & Co. "A lot things are creating headwinds for the industry," said Martilotti, who is more negative than most of his colleagues with a sales estimate in the high 15 million range.
The looming U.S. showdown with Iraq, rising energy prices and a shaky economy sent U.S. consumer confidence to its lowest levels in nearly 10 years, the U.S. Conference Board, a private business research group, said on Tuesday. Those factors also hurt auto sales, analysts said.
Paul Taylor, chief economist with the National Automobile Dealers Association, said sales were already down about 2 percent from February last year before the snowstorm hit the East Coast.
"The whole eastern seaboard, one of the rich motherlodes of car sales, basically slowed to a crawl for several days," Taylor said. "We know sales will be down. We think by late spring we will have caught up, in part because a lot of people will have a severe case of cabin fever by the time they shovel out of this."
NO CEASE-FIRE IN PRICE WAR
Consumer incentives, estimated to be up about $500 per vehicle in February from year-ago levels, have been losing their punch, analysts said. The industry stepped up its long-running price war this month as Ford Motor Co. quickly matched incentives General Motors had offered its dealers to sell more SUVs.
But most analysts expect U.S. vehicle sales to be flat or slightly stronger than January's annual rate of 16.1 million. Strong incentives unleashed at the end of last year spurred a sharp rise in vehicle sales in December at the expense of January results, analysts said.
Ford was expected to post stronger sales for the third straight month, most analysts agreed, rebounding from weak results a year ago. Most foreign automakers were also expected to report better sales, including BMW and Mercedes Benz. Some German executives have recently expressed fears that the split between the United States and Germany and France over whether to go to war with Iraq would hurt sales of German goods here.
General Motors and Chrysler are both expected to report moderately weaker sales.
Ford and GM could also cut their forecasts for new-vehicle production in North America next week, analysts said. As sales have slowed, inventories of unsold cars and trucks have mounted, spurring analysts to predict production cutbacks.
Additionally, Ford is scheduled to slowly ramp up production of its new F-150 pickup truck, the best-selling vehicle in the United States, in the second quarter which would lead to a drop in production of the older model.
Production is key to automakers' earnings because they book profits when vehicles are shipped to dealers rather than when they are sold on dealers' lots.
"It would seem it's decision time for the Big 3 (U.S. automakers): cut price, cut production or some combination," Goldman Sachs analyst Gary Lapidus said in a recent research report.