Bloomberg Analysts predict 34% drop in Chrysler August sales

Analysts polled by Bloomberg News predict Chrysler and General Motors will be the big losers when August sales are reported tomorrow.

The average of forecasts by analysts from Deutsche Bank, Goldman Sachs, Lehman Brothers and JP Morgan agree with the prediction made by Jesse Toprak of Edmunds.com that Chrysler will take the biggest hit and report a 34 percent plunge in sales compared to August 2007. Individual estimates ranged from a 30 percent drop seen by JP Morgan’s Himanshu Patel to a 37 percent dive expected by Patrick Archambault of Goldman Sachs. Archambault predicts GM sales will take a similar fall, but he is the only analyst who thinks Chrysler will have company.

Analysts are pessimistic about Chrysler’s results partially because of Chrysler Financial’s exit from the leasing market. August is the first full sales month in which retail leases were not offered. To compensate, Chrysler is offering 6-year, zero-interest loans on some vehicles. It also instituted a program allowing employees to give away their discount to one person from Aug. 1 through the end of September.

GM has been more aggressive with its employee-pricing-for-everyone program that went into effect for the last two weeks of the month. GM also had a 72-month, interest-free financing program. However, the analysts see the incentive program producing only limited benefits. The average of the predictions from the financial analysts calls for GM sales to be 29 percent behind last year’s numbers. Once again JP Morgan’s Patel was the most optimistic, envisioning a 20 percent drop, while Goldman Sach’s Archambault was the pessimist, seeing GM sales dropping as much as Chrysler’s.

Ford sales are seen declining 21 percent. The range of estimates was much narrower, ranging from 20 percent predicted by Brian Johnson of Lehman Brothers to a 25 shortfall forecast by Patel. All of the Bloomberg analysts were more pessimistic about the Dearborn automaker’s results than Toprak, who thinks Ford’s numbers will be just 16 percent down from August 2007. Ford itself agrees with Toprak: In an interview, George Pipas, the company’s own sales analyst, said Ford’s sales are likely to be down 15 percent, the same as in July.

The analysts see Toyota reporting an 11 percent shortfall and a 7.4 deficit from Honda, both of whom have supply problems. They expect Nissan to buck the trend with a 1.8 percent improvement.

Overall sales will be down, but not as badly as they were in July which had the lowest seasonally adjusted sales rate in 16 years. The average prediction is a SAAR of 13 million light vehicles, an improvement over last month’s 12.55 million but a far cry from last August’s 16.3 million sales rate.

The situation is unlikely to improve in the remaining months of the year. Recent data from the Commerce and Labor departments indicate the economy has not yet bottomed out and tougher lending requirements and restrictions on leasing will continue to restrict access to financing. Hefty price increases announced by some manufacturers for the 2009 models may dampen consumer enthusiasm.

One bright spot for the Detroit automakers, including Chrysler, is the correction in the oil market. Oil prices have fallen and it is now trading at a five-month low since Hurricane Gustav was not as damaging as was feared. The national average price of a gallon of regular unleaded is currently $3.687, down almost 43 cents from the record price recorded in mid-July. Combined with incentives totaling as much as 40 percent of the sticker price, this has renewed interest in the larger trucks and SUVs that have been sitting on dealer lots.