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Ford, Chrysler set to post big sales decline

Honda the only automaker expected to report year-over-year improvement

By Shawn Langlois, MarketWatch

Last Update: 2:01 PM ET Sep 28, 2007

SAN FRANCISCO (MarketWatch) -- Ford Motor Co. and Chrysler are expected to post double-digit declines in September U.S. sales next week, but the overall industry is starting to stabilize after the sluggish economic climate made for a brutal summer in the showrooms.

August marked the beginnings of a recovery, when a surprising 6.1% jump in General Motors Corp. sales pushed the overall rate well above Wall Street targets.

But analysts blame lofty gasoline prices and the persistent housing crunch for what's shaping up to be yet another decline. The two-day nationwide strike at GM likely didn't have much of an impact on the results, as the Detroit giant had plenty of inventory to move.

Lehman Bros. analyst Brian Johnson is looking for a seasonally adjusted annual sales rate of 16.1 million, down from 16.6 million a year earlier and off slightly from last month.

That would still be a marked improvement from the mid-15 million range in June and July, the worst back-to-back months since a much-longer GM strike in 1998 crippled sales.

Johnson said that while some promotional spending offset the industry's headwinds in September, lower interest rates will probably turn out to be the sales driver in the future.

"September was probably still too early to have seen the benefit from the Fed's easing on auto sales," he said in a note to clients. "However, there has historically been a positive correlation between rate cuts and lagged auto sales."

July also marked the first time foreign brands, led by Toyota Motor Corp. outsold domestic nameplates in the U.S. market. GM, Ford and Chrysler combined for 48.1% market share, according to Autodata, the lowest level ever.

But not even the Japanese juggernaut is immune to the daunting economic challenges.

Jesse Toprak, an analyst for car-buying research Web site Edmunds.com, said he expects Toyota to hand in a 4.2% drop, its third straight month of year-over-year declines.

"Toyota has been doing so incredibly well it just keeps getting tougher to improve on their prior year numbers," he said. "It's really not a big surprise or shocking downturn; it's more about the market weakness itself."

Ford's expected 17.7% hit, however, is indicative of more than just broader industry troubles. Some of the decline can be attributed to planned fleet and rental sales cutbacks, Toprak said, but much of the blame should also be placed on the product lineup.

"New cars and trucks from other automakers, like GM's line of big trucks and SUVs, are drawing buyers away from Ford," he added.

Still, GM's spruced-up menu of new cars and trucks won't keep the company from posting a 3.1% dip, said Toprak, who also forecast the now-private Chrysler to hand in a 10.3% slide.

Honda Motor Co. is the only automaker pegged to post gains, up 11.8%.

Overall, Edmunds.com estimated a 4.5% decline in car sales. There was one less selling day in September 2007 than a year earlier. Adjusting for that, sales are expected to be mostly flat when compared to September of last year

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