GM and Ford auto sales decline less than expected in May – Is now the time to buy a car?

Are the shallower declines in GM and Ford sales for May really saying much about the current car-buying climate? (Motor Trend)
Are the shallower declines in GM and Ford sales for May really saying much about the current car-buying climate? (Motor Trend)

BY FELICE BAKER – MEDILL REPORTS

Ford Motor Company announced today that May sales fell by a narrower percentage than analysts expected. In fact, total domestic vehicle sales for the company fell 24.3 percent compared with sales during the same month a year ago, and fell less than analyst’s projections of a 28.5 percent drop for the month.

Ford May sales were also the highest for the company since July 2008. April sales declined 32 percent compared with the same month a year ago.

Emily Kolinski, vice president of sales and marketing at Ford, said in a web conference call, that the sales improvement is a sign that the economy is bottoming out.

We continue to be very encouraged about a second half recovery (for 2009) based on the continued improvements in leading indicators, including the manufacturing [purchasing managers index], consumer confidence, and moderation in new claims for unemployment insurance. These indicators are consistent with an improvement in economic conditions later this year. In that light, it may be tempting to view the May sales results as another proof-point for the emerging economic recovery.

General Motors also reported a less-than-expected 29 percent sales drop for May, compared with the same month a year ago. Analysts projected GM sales for May to decline by 36.9 percent. The sales announcement comes one day after the company filed for Chapter 11 bankruptcy protection.

The Ford and GM sales results for May beg the question – is now a good time to buy a car? Especially now that the economy shows signs of stabilizing?

Adolfo Laurenti, deputy chief economist at Mesirow Financial, said that the shallower decline in May is not necessarily an indication that it is a good time to buy a car. He said that constrained credit continues to make it difficult to take out loans to buy big-ticket items, and that the general mindset is still geared toward delaying purchases wherever possible.

“We used to live in a world where access to credit was easy, and it was easy to replace cars every three years or so,” said Laurenti in a phone interview, “Consumer behavior has changed. We live in a world where people will permanently delay buying a car.”

Laurenti added: “As for the shallower sales decline this time around, car companies usually sell a small number of cars at a time – about 9 million per year – and car purchases, by nature, are so unpredictable, so infrequent, and occur for so many different reasons that I have never thought that monthly auto sales told the public much about buying ability.”

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