U.S. auto sales rose to near their highest level of 2011 in October, early sales results showed, although shares in General Motors Co
GM posted a sales gain of 2 percent in October, a weaker gain than some analysts had expected for the top U.S. automaker. Its shares fell as much as 9 percent on a day when the broad market as measured by the S&P 500 index <.SPX> was down 2.7 percent.
Ford Motor Co's
Sales for Chrysler Group LLC jumped by 27 percent, its best result for October in four years. Shares in Chrysler's parent Fiat SpA
Nissan <7201.T> October sales were up 18 percent as the Japanese automaker extended a winning streak against rivals Toyota <7203.T> and Honda <7267.T>.
Analysts said the sell-off in share prices in the auto sector reflected concern that a collapse of a bailout deal for Greece could trigger an economic crisis that would derail the slow but steady growth most have expected in the United States through 2012.
We don't have a strong recovery to begin with and the last thing it needs is a couple of body blows, said Paul Ballew, chief economist at insurer Nationwide. Every time this industry starts to feel better about itself, you kind of look at the world around and gulp.
GM said the slower pace of its October sales gain reflected its progress in selling down 2011 models and throttling back on incentives.
Analysts said the sharp sell-off in GM shares showed the sensitivity of the sector to concerns of a broader downturn.
Overall, GM's October sales were not a surprise to us and consistent with our (fourth-quarter) model, Citi analyst Itay Michaeli said in a note for clients.
Said David Whiston, auto industry analyst with Morningstar: The falloff is much more related to what is going on in Europe than the auto sales.
U.S. auto sales, which are tracked as one of the earliest snapshots of consumer demand, slipped in the spring and early summer amid concerns about the prospect of a renewed downturn in the U.S. economy and supply disruptions triggered by the March earthquake in Japan.
OCTOBER STRONG, BUT CONSUMERS STILL A WORRY
Analysts said the improved results for October showed some consumers have delayed vehicle purchases for as long as they could during the downturn. Used car prices are higher and the average age of cars and trucks on American roads is now about 11 years, the highest-ever reading for that indicator for pent-up demand.
Jonathan Browning, chief executive of Volkswagen Group of America, said the strong October sales for Volkswagen came despite the still-weak economy.
There are still are some underlying consumer confidence issues, Browning said.
He said he expected industrywide U.S. sales to end at about 13 million vehicles for the full year, up from 11.6 million in 2010. The sales rate in the first nine months of 2011 was 12.5 million.
Retail sales for Chrysler, which exclude discounted sales to fleet operators like car rental agencies, were up 40 percent in October, a rebound that underscored how far the weakest of the three U.S. automakers has bounced back since its 2009 bankruptcy and bailout.
Last month, Chrysler was third in U.S. sales behind cross-town rivals GM and Ford and slightly ahead of Toyota Motor Corp.
Nissan's U.S. sales chief, Al Castignetti, said he expected that fourth-quarter U.S. auto sales would hit the highest level of the year as consumers shrug off the economic and financial uncertainty.
We've been dealing with this all year, he said. People have been conditioned to deal with the headlines.
October was the first month that dealers at Nissan's rivals, Toyota and Honda, reported that their inventories had returned to near normal levels, seven months after the earthquake in Japan that disrupted the supply of key components including electronic sensors.
Nissan was quicker to bounce back from the March disaster.
Analysts are watching the impact of floods in Thailand, which could crimp production for the Japanese automakers in the months ahead.
Honda withdrew its annual earnings guidance on Monday, citing the strong yen and floods in Thailand, just as it was starting to recover from Japan's earthquake and tsunami.
Among Japanese automakers, Honda has been hit the hardest by the supply disruptions caused by both Asian disasters. The latest floods in Thailand have caused direct damage to the company's car factory in Thailand's Ayutthaya province.
Honda said its North American production would be half of its original plan from November 2 through November 10 at its six plants in the United States and Canada due to parts shortages resulting from the floods.
GM shares were down 8.8 percent at $23.58 on Tuesday afternoon, with Ford shares down 5.1 percent at $11.08
(Reporting by Bernie Woodall and Kevin Krolicki, editing by Gerald E. McCormick and Matthew Lewis)