The U.S. auto industry's March sales met or beat Wall Street's dismal expectations, sending a bit of light into a sector struggling to mimic the incentive-driven successes of their European rivals.
The embattled car companies' March results continued to be weak, but the results were slightly less bad than investors had feared and the companies managed to cut into inventories.
General Motors Corp
I think we're seeing maybe the first signs of a brightening in the outlook for the auto industry in March, GM chief sales analyst Mike DiGiovanni said on a conference call.
Ford Motor Co
Both companies managed to reduce their inventories, a key goal for both.
We believe we may be at or near the trough of the industry's year-to-year comparisons, but do not see an uptick in industry demand before (the fourth quarter of 2009), at the earliest, said Efraim Levy, analyst with Standard & Poor's Equity Research.
Even Chrysler LLC, the smallest of the U.S. Big Three, said its results were slightly better than feared and managed to sell 101,000 cars -- the first time it topped 100,000 in a month since last September.
Car markets in Europe reported tentative shoots of recovery but Honda Motor Co <7267.T> moved to further cut U.S. output. Government incentives in Europe encouraging cash-strapped consumers to ditch old cars for new began to bear fruit.
Sales rose strongly in France and Italy and the rate of decline slowed in Spain, while in Germany government officials said more than 860,000 car owners had signed up for a new-for-old scrappage bonus.
THE GM TALE
Despite the optimism about sales, U.S. car companies are still coming up with new incentives.
GMAC Financial Services said it will lower vehicle financing costs and resume making loans to subprime borrowers, as it tries to jump-start sales.
GMAC said the moves are expected to make at least $5 billion of credit available to customers over the next 60 days and eased a variety of fees and payments imposed on dealers.
GM's shares have been under pressure all week after its new chief executive said there was a rising chance it could file for bankruptcy by June.
The Obama administration remains optimistic that GM can restructure without going to bankruptcy, a senior administration official said on Wednesday.
We remain optimistic that significant restructuring can be executed without the use of the bankruptcy code, the administration official told Reuters.
GM shares were recently down 2.5 percent in New York Stock Exchange trade at $1.90 and Ford shares were up 5 percent at $2.77. GM's 8.375 percent bond due 2033 fell almost 2 cents, to just about 11 cents on the dollar, MarketAxess said.
EURO SALES AND STRUGGLES
While some European automakers also showed a bit of life during March, the industry continues to face severe roadblocks.
A Russian car plant said it will shut down indefinitely this month and lay off 5,000 workers in the first major auto failure of the economic crisis.
Izhavto, which assembles cars for Korea's Kia Motors <000270.KS> and AvtoVAZ
In Spain, car sales fell 38.7 percent in March after a 48.8 percent drop in February, partly on the stimulus plan.
With U.S. auto sales still at multidecade lows, the picture from Asia was equally gloomy.
South Korea's five automakers in March posted an 18.8 percent drop in sales, with exports down 19.9 percent. Hyundai's <005380.KS> registrations fell 9.8 percent.
In Japan, auto sales slumped 25.3 percent.
There were some bright spots. Honda shares rose after the automaker said it would cut production in the United States by temporarily shutting factories, and would cut pay for workers.
In Paris, Renault
(Reporting by John Crawley, Walden Siew, John Parry, David Bailey, Marcel Michelson, Jeff Mason, Kevin Krolicki, Soyoung Kim, Anton Doroshev; writing by Patrick Fitzgibbons; editing by Tim Dobbyn, Dave Zimmerman)