U.S. auto sales rise in November, boosted by discounts

Reuters

* November sales rise 8.9 pct, monthly rate hits 16.41 mln

* Big pickup trucks still popular with U.S. buyers

* Incentives average more than $2,500/vehicle

By Ben Klayman and Deepa Seetharaman

DETROIT, Dec 3 (Reuters) - Major automakers reported theirbest U.S. sales month in six and a half years in November asaggressive discounting and the continued popularity of bigpickup trucks helped trounce Wall Street forecasts.

The industry's annual U.S. sales pace reached 16.41 millionvehicles last month, the best monthly showing since February2007, according to industry research firm Autodata. This handilybeat expectations for a rate of 15.75 million.

Yet shares of General Motors Co and Ford Motor Co slid more than 3 percent as some investors worried thatthe discounts signaled a return to the unhealthy practices thateroded industry profits in the years before the global recessionof 2009.

Other investors also fretted that consumers' need to replaceaging vehicles, which propelled U.S. light vehicle sales afterthe recession, would not support the current pace of sales gainsin 2015 and beyond.

"The sales rate for cars increased so dramatically in thelast several years," said Jesse Toprak, an analyst with researchfirm Truecar.com. "The fear might be that it's not going to holdup beyond next year." But Toprak said he does not share thisview.

November U.S. auto sales rose 8.9 percent, beating theyear-to-date increase of 8.4 percent.

Manufacturers provided incentives averaging more than $2,500per vehicle in November, TrueCar.com said. Automakers beganoffering aggressive deals in the second half of the month totake advantage of Black Friday shopping following ThanksgivingDay on Nov. 28.

Jonathan Browning, chief executive of Volkswagen of America, said the industry was "super aggressive" in therun-up to and through the holiday weekend.

Incentives were particularly heavy in the midsize sedansegment, which includes Toyota Motor Corp's Camry andHonda Motor Co's Accord, several executives said.

The discounts "seemed to spark some investor concern aboutdiscipline," Citi analyst Itay Michaeli said in a research note.

"While we recognize that price gains are less balanced thanthey were a year ago and that recent pressures need to bemonitored, the overall numbers remain solid," Michaeli said.

In interviews and conference calls, auto executives disputedconcerns that the industry was overly reliant on incentives tospur sales in November, which was the strongest U.S. sales monthof 2013.

"This is not a purely incentive-fueled industry right now,"GM's North American chief, Mark Reuss, said. "It's not."

GM shares were down 3.3 percent to $37.81 while Ford shareswere off 3.2 percent to $16.52, while the broader S&P 500 indexwas off 0.6 percent.

On the same day the industry posted its strong results, afederal judge ruled the city of Detroit, once the cradle of theauto industry and now a symbol of urban decay and mismanagement,was eligible for bankruptcy.

'VALUABLE LESSONS'

Executives and analysts said the Detroit automakers wereunlikely to revert to offering outsized incentives. Thoseunhealthy practices were a factor in GM and its smaller U.S.rival Chrysler Group LLC taking federal bailouts in 2009 tosurvive.

"I personally think the industry as a whole learned a lot ofvaluable lessons in 2008 and 2009," said Fred Diaz, who leadsNissan Motor Co's day-to-day U.S. operations

The automakers "are doing a really good job keepinginventories in line," said Diaz, a former Chrysler executive.

U.S. vehicle sales bottomed in 2009 at 10.4 million. Theyrose to 14.5 million last year, and GM has said U.S. auto saleswould likely finish at 15.6 million this year.

Monthly sales are regarded as an early indicator of the U.S.economy's health. The auto industry has held up better than thebroader economy because of easier access to credit andconsumers' need to replace aging vehicles. The average vehicleon the road in the United States is more than 11 years old.However, Toyota's North American head, Jim Lentz, forecast lastmonth that pent-up demand to replace aging vehicles will slow.

GM emphasized that it was disciplined in its approach toincentives. Executives at the U.S. automaker said incentives asa percentage of average vehicle prices held steady at around 10percent during the first nine months of the year.

Ford said the midsize car segment accounted for 14.5 percentof the industry last month, down one percentage point fromNovember 2012. The second-largest U.S. automaker also said theweak yen allowed Japanese automakers to offer deals.

"We have started to see in the industry some top-linepricing actions on some of the vehicle lines, such as hybridsand midsize sedans, by some of the individual Japanese(automakers) probably that could be related to the weakeningyen," said John Felice, Ford vice president of U.S. marketingand sales.

The three Detroit automakers and two of Japan's top threereporting year-to-year increases on Tuesday. Honda was aloneamong major automakers in reporting flat sales and missinganalyst estimates.

Chrysler, now a unit of Fiat SpA, said its Novembersales leapt 16 percent, while GM reported a 14 percent jump.Ford sales rose 7 percent. Sales rose 10 percent at Toyota and11 percent at Nissan.

Big trucks were the best-selling vehicles at each of theDetroit automakers.

Ford's industry-leading F-series pickup outsold all of thecompany's passenger cars combined, rising 16 percent to 65,501.Combined sales of GM's Chevrolet Silverado and GMC Sierra wereup 15 percent at 48,748. Chrysler's Ram pickup gained 22 percentto 29,635.

Meanwhile, in the race for bragging rights as biggest sellerof luxury vehicles, Daimler's Mercedes brand after a13 percent sales increase in November holds a lead of more than7,600 vehicles over BMW.

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