New Car Sales in US Through The Roof!

DETROIT Reuters reported that American consumers bought new cars and trucks at a blistering pace in October, lured into dealerships by interest-free loan deals launched to spur demand after the Sept. 11 attacks.

They went on to report that Auto industry executives and analysts expect sales to decline steeply once the offers end. But even as dirt-cheap loans and other incentives have pushed automakers into selling many vehicles at a loss, the companies show no signs of pulling back on their free-spending tactics anytime soon.

Reuteurs quoted Wolfgang Bernhard, chief operating officer of the Chrysler side of DaimlerChrysler AG``Everybody should be concerned about what this means in the long term, this can potentially hurt our bottom line for years. We are eating up our future.''

Reuturs stated tha sales in October are seen up roughly 15 percent, at an annualized pace of about 20 million vehicles. That's far ahead of the high mark this year of 17.5 million in January, and not far from the record high of over 21 million hit in September 1986.

Bucking a trend, the largest gains will likely come from Detroit's Big Three, with General Motors Corp. and Ford Motor Co. both seen up over 15 percent. GM, which started the boom with its offers of zero- and low-interest loans on all its vehicles, could be up as much as 30 percent.

Automakers who haven't been as enthusiastic about cheap loans will likely lag behind, including Toyota Motor Corp. and Honda Motor Co. Ltd. . But the deals seem to be pulling in shoppers to all brands even if there's no cheap loan deal to be had.

``The real impact, when everybody announces zero percent, is a tremendous amount of floor traffic,'' said Roger Penske, chairman of United Auto Group Inc. a chain of new- and used-car dealerships. ``We're seeing that even on brands that aren't offering zero percent.''

TROUBLE SIGNS

The surge in sales comes as the U.S. economy remains weak in the wake of the attacks on New York and Washington. Economists expect the unemployment rate, a key indicator of auto sales, to continue rising for the remainder of the year, from 4.9 percent in September to 5.3 percent by the end of the year.

Consumer confidence, another key indicator, rebounded slightly in October from its post-attack lows. But sentiment fell toward the end of the month amid worries over the scope of bioterrorism.

With all the negative signals, the industry is bracing for buyers to pull back once the zero-percent loan offers expire. GM and Chrysler have extended their offers to mid-November, while Ford's deals are set to end Oct. 31.

Analyst Ron Tadross of Bank of America estimates the deals pulled in 160,000 buyers in October. Shoppers who would have waited a few months otherwise, he said.

Another analyst, Gary Lapidus with Goldman Sachs, notes that after two similar monthly sales spikes in the late 1980s, sales fell about 30 percent in the following months.

The sales jump has not been matched with increases in production, and the Big Three have idled plants in October to reduce inventories. And GM has already said when it ends its zero-percent offers, it will launch a new round of more conventional ``end of the year'' sales incentives, including cash rebates.

``When these incentives end it's going to be a big drop down,'' said Peter Glassman, economist at Bank One Corp. in Chicago. ``Consumers have been trained to look for the best deals, and that's why (automakers) haven't been able to get rid of them.''