DETROIT -- General Motors on Thursday led a late-day rally in auto stocks, one day after the world's largest automaker posted dismal U.S. sales results for August and cut vehicle production.
GM shares closed up 4.1 percent at $42.90 on the New York Stock Exchange, its largest one-day percentage gain since December. Shares of Ford Motor Co. ended up 3.31 percent at $14.36, while DaimlerChrysler shares closed up 1.57 percent at $42.77.
One auto analyst said investors were betting that automakers will have to send more vehicles to dealerships in Florida, which after sustaining damages from Hurricane Charley is getting ready to tackle Hurricane Frances. Florida is one of the top states for auto sales.
"All it takes is broken glass on a vehicle and then salt water spray to get in the car for an insurance company to total out the vehicle," said Richard Hilgert, analyst with Oppenheimer & Co. "That means that the manufacturers are going to have to refill the distribution channel down there."
GM and Ford, which are grappling with high inventories, on Wednesday set targets for fourth-quarter vehicle production in North America that were 6.8 percent and 7.8 percent below year-ago levels, respectively, after weak U.S. sales in August.
But those cuts will fail to pare high inventories, and more costly cuts could come early next year, analysts said on Thursday.
"We don't expect the production cuts to solve the industry's inventory problems, raising the specter of additional cuts in 2005," said Deutsche Bank analyst Rod Lache, who also cut his earnings outlook on GM.
Production cuts can hurt earnings because automakers count profits from vehicles when they are shipped to dealers, not when they are sold to consumers.
Cars and trucks piled up on dealer lots as both automakers saw sales decline for the third straight month, despite aggressive consumer incentives, as high energy prices and weak consumer confidence sapped demand.
If vehicle sales do not pick up in the next four months, "the automakers will have to bear the pain of further production cuts," J.P. Morgan analyst Himanshu Patel said in a research note.
Industry sales fell 5.4 percent in August from year-earlier levels. Deepened worries about the overall health of the U.S. economy could hurt vehicle sales in the coming months.
On Thursday, Ford's chief sales analyst tried to play down concerns over inventories. "The sell-down for 2004 models is going quite well," George Pipas said, adding that the automaker was comfortable with its current level of inventories.
The planned fourth-quarter production cuts from GM and Ford are expected to hurt major automotive suppliers.
Deutsche Bank on Thursday cut the earnings outlook on American Axle & Manufacturing Holdings Inc., Delphi Corp., Lear Corp., Magna International Inc. and TRW Automotive Holdings Corp.
Visteon Corp., the largest supplier to Ford, will have to cut its earnings outlook after the No. 2 automaker cut its production outlook, Prudential Securities analyst Michael Bruynesteyn said in a research note.
Goldman Sachs cut its fourth-quarter earnings estimate for Delphi Corp., the largest U.S. auto parts supplier.