PREVIEW-May U.S. auto sales to underscore tepid recovery

* What: U.S. auto sales for May

* When: Wednesday, June 2, starting at about 10:45 am ET

* Analysts see 11.4 mln annual rate vs 9.9 mln year ago

By Soyoung Kim

DETROIT, June 1 (BestGrowthStock) – U.S. May auto sales are likely
to show a lackluster recovery as consumers remain cautious
about the economy and the impact of hefty discounts starts to
fade.

Analysts expect most automakers, including Ford Motor Co
(F.N: ) and Chrysler, to post double-digit gains from a year
earlier in a further sign of the industry’s comeback. Sales had
hit a 27-year low last year.

But the pace of recovery is not as robust as initially
expected amid still-uncertain housing and employment markets,
while the euro-zone debt crisis could further erode a nascent
improvement in consumer confidence, analysts said.

A Reuters poll of 34 analysts shows an average estimate of
May auto sales at 11.4 million vehicles on a seasonally
adjusted annualized basis.

That would be up from 9.9 million a year earlier, when car
buying was largely an afterthought. Chrysler was in bankruptcy,
and General Motors Co [GM.UL] sought protection from creditors
on June 1, 2009.

The estimated sales rate would also mark a slight increase
from 11.2 million units from the previous month, but a decline
from 11.8 million in March, when aggressive incentives boosted
demand.

“If we continue on this current gradual pace, it looks like
it could be the lower end of (our 2010 forecast),” Ford sales
analyst George Pipas said.

The No. 2 U.S. automaker has projected 2010 U.S. industry
sales of 11.5 million to 12.5 million vehicles, including
medium and heavy trucks.

The average selling rate of 11 million units so far this
year means the industry would have to sell nearly 13 million
vehicles at the annualized rate in the second half to get to
the midpoint of Ford’s range.

“That hinges on whether we get external factors like the
Europe crisis under control,” said Jeff Schuster, executive
director of forecasting at industry tracking firm J.D. Power &
Associates.

“There has to be some impact on consumer confidence overall
if the crisis continues, as it may well,” Schuster said.

A May sales rate of about 11 million units would merely
suggest auto sales are “tracking sideways,” shy of Wall
Street’s expectations, JPMorgan analyst Himanshu Patel said.

Pipas said he expected sales to recover at a faster — but
not “widely stronger” — pace in the second half of this year
than the first half.

The industry needs a meaningful recovery in home prices and
employment to push it out of the slow track, he added.

INCENTIVES LOSE MOMENTUM

Deals around the Memorial Day weekend probably drove up
sales at the end of May after a wavering start, analysts said.
Overall, incentives were little changed from the previous two
months, when Toyota Motor Corp’s (7203.T: ) record discounts
prompted rivals to follow suit.

Industry tracking firm Edmunds.com sees Toyota sales up 8
percent in May from a year earlier, underperforming all major
automakers, even after it extended its discounts for a third
consecutive month to recover from safety recalls. Toyota sales
had surged 41 percent in March and 24 percent in April.

By comparison, Edmunds.com expects gains of 28 percent for
Chrysler, 22 percent for Ford and 12 percent for GM.

Sales for Hyundai Motor Co (005380.KS: ) and its affiliate
Kia Motors Corp (000270.KS: ) are seen up 28 percent, while Honda
Motor Co (7267.T: ) could see a gain of 22 percent and Nissan
Motor Co (7201.T: ) a rise of 11 percent, Edmunds.com forecast.

“We’re noticing that Toyota’s incentive program is starting
to fall on deaf ears since most of the people who were open to
getting deals from the automaker already made their purchases,”
Edmunds.com senior analyst Jessica Caldwell said.

Ford’s Pipas said Toyota had “dialed back a bit” on
incentives in May, and he saw no signs of an incentive-based
price war in the U.S. auto market that could pressure margins.

Stock Market

(Reporting by Soyoung Kim, additional reporting by Kevin
Krolicki; editing by Lisa Von Ahn)

PREVIEW-May U.S. auto sales to underscore tepid recovery