Lower auto sales seen for October

Auto analysts forecast another slow month for the industry in October, with Ford Motor Co. falling hardest as it cuts sales to rental-car fleets.

Erich Merkle, vice president of auto industry forecasting for consulting company IRN Inc. in Grand Rapids, said sales will probably be soft through the rest of the year because of the weak economy and anxious consumers. Automakers report October sales Thursday.

Merkle's dim view was echoed throughout the industry. On Wednesday, AutoNation Inc., the nation's largest automotive retailer, said its third-quarter profit tumbled 12 percent. AutoNation Chairman and Chief Executive Mike Jackson said he expected auto sales will be hurt by confidence-sapping weakness in the housing market well into 2008 despite tight management of expenses and inventory.

"Exactly when consumer confidence will come back that we see a stabilization in auto sales, it's very difficult to say," Jackson told The Associated Press. "Most likely sometime next year."

Merkle predicted an annualized sales rate of 16 million vehicles for October. The annualized rate shows what sales would be if they continued at the same pace for a year. The rate in September was 16.2 million, according to Autodata Corp. The rate peaked at 17.3 million in 2000.

The auto research site Edmunds.com expects 2.4 percent sales growth for October versus a year ago. Edmunds said Japanese automakers and General Motors Corp. could buck the trend because of hot-selling new vehicles, including the redesigned Honda Accord and Cadillac CTS sedans.

An October decline would mark a year since Ford has seen a monthly sales increase, according to Ward's AutoInfoBank.

Toyota Motor Corp. is on track to replace Ford as the No. 2 automaker after GM in the U.S. market, based on sales in the first nine months of this year. Edmunds.com chief economist Jesse Toprak predicts Ford's sales will drop 16 percent in October, while Toyota sales will rise.

Ford is ready to take the hit. It wants to reduce sales to rental-car agencies because they can hurt brand image and resale values. In September 2006, for example, Ford sold nearly 23,000 of its old Taurus models to fleets. This year, Ford is no longer selling the old Taurus, and its new Taurus can't make up the lost volume. Ford sold 4,230 new Taurus sedans this past September, according to Autodata.

"I don't think anyone would ever expect them to get up to 22,000 per month on the new Taurus, because it isn't the darling of rental companies," Merkle said.

Merkle also said the new Taurus has a sedate design that isn't firing up consumers.

"It's a left-brain purchase. That's the problem. Toyota and Honda will beat you on the left side of the brain each and every time," Merkle said. "It's got to become a right-brain purchase. It's got to become more emotional."

Ford President and Chief Executive Alan Mulally pushed to revive the Taurus name on what used to be the Five Hundred. Although sales of the new Taurus were slow in its first few months in showrooms, Mulally said Ford is just starting to market the revamped full-sized car.

"It's not over yet," he said in a recent interview with The Associated Press. "This is a big change. We're the ones that stopped it. Now we're trying to start it again, and it's going to be a little difficult."

The Taurus became the best-selling car in America in 1992 with sales of nearly 410,000, unseating the Honda Accord just as Japanese imports were starting to take hold in the United States. It held the top spot for five straight years until it was supplanted by the Toyota Camry in 1997. Ford stopped making the Taurus in October 2006 until Mulally brought the name back.

Mulally called the new Taurus "fabulous," but he said the next generation of the Taurus is the vehicle to watch.

"They're just eye-watering," he said. "I would have given anything if we would have done that, like, first. But again, we are where we are. The plan is consistency of purpose. Every one of these cars in each segment, improve them year after year, add a couple of new models in there and give the customers what they want."

Ford already has placed up to $1,500 in cash discounts on the 2008 Taurus, but spokesman Jim Cain said incentives are used often by automakers on new products these days.

"Most vehicles today launch with some sort of cash or interest rate incentive," he said.

Merkle said Ford could start to turn things around in 2008 and early 2009 with new products, including a new F-150 pickup and the Flex crossover.

Ford isn't the only automaker on a bumpy ride this fall. Toyota reported its third straight monthly decline in September, a string of rare losses for the automaker. Toprak says Toyota's sales will be up in October, but Merkle believes they'll be flat.

Merkle said Toyota has been hurt by declining home values and foreclosures in California, which is one of its top markets. He said Toyota also has a full line of vehicles now, including large pickups, and therefore feels more of the pain from high gas prices and slowdowns in construction.

"They're not immune to economic softness anymore," Merkle said.