Here’s a bad sign for the U.S. economy: Sales at General Motors Co. just plunged by the most in more than a year, and its Detroit rivals aren’t faring much better.
The 15% drop GM posted in its home market last month was its steepest since May of last year. Ford Motor Co. reported its biggest sales decline since October and Fiat Chrysler Automobiles NV had its second-worst tumble this year.
The disappointing showing underscores how Detroit has been struggling to live up to President Donald Trump’s prediction that it would become “the car capital of the world again.” The hometown automakers are instead laying off U.S. workers, particularly those who build passenger cars that have fallen out of favor with American consumers. A demand slump has rendered spending on vehicles and parts a drag on U.S. economic growth, after years of contributing to expansion.
“You can’t jawbone the economy,” said Diane Swonk, CEO and founder of DS Economics in Chicago. “The auto industry was stronger than the rest of the economy for a while because they were giving credit to people who couldn’t pay loans. Sales crested sooner and now they are paying the price.”
The traditional U.S. automakers each missed projections for declines that analysts gave in a Bloomberg News survey. While Nissan Motor Co. and Honda Motor Co. both beat projections, only Toyota Motor Corp. posted a gain.
Analysts were expecting the annualized pace of light-vehicle sales would slow to 17 million for July. The projected rate, which is adjusted for seasonal trends, would be down from 17.9 million a year earlier.
GM forecast an industry selling rate of 16.9 million for last month. With the company’s vehicle inventory at 104 days’ supply, well above a year-end target of about 70 days, executives have said they plan to build 150,000 fewer vehicles in North America in the second half of the year compared with the first six months.
While part of GM’s planned factory downtime relates to plants being retooled for updated models, including all-important full-size pickups, the company also has cut shifts at four passenger-car assembly plants, and a fifth is scheduled to be dropped in September.
Ford plans to reduce North American production in the third quarter by 34,000 vehicles compared with a year earlier. The company last week cited the need to match output with demand and a Kentucky truck plant gearing up to make new Expedition and Lincoln Navigator sport utility vehicles.
Shares of most major automakers have trailed benchmark U.S. stock indexes this year. The exceptions have been Fiat Chrysler, which is poised to benefit from the shift in consumer tastes away from cars toward pickups and sport utility vehicles, and Tesla Inc., which has soared in anticipation of the more affordable Model 3 sedan.
GM shares dropped as much 3.9% early Tuesday afternoon, while Ford fell as much as 3.1%.
Automakers are poised to struggle measuring up to strong second-half results a year ago as both regular consumers and rental companies have been cutting back on car purchases. Deliveries plunged about 40% for both the Chevrolet Impala and Ford Fusion last month.
Those sorts of numbers are a setback for Trump, who told automakers in March that he would cut them a break on environmental standards and wanted more hiring in return.
“The idea was that some kind of deregulation would make it more attractive to build cars here and that implementing a tariff would create investment, that won’t be relevant at this point,” said Lewis Alexander, chief economist at Nomura Securities International Inc. in New York.
By Jamie Butters and David Welch