Anyone who's ever learned to drive a stick is familiar with that grinding sound you hear whenever you miss a gear. You know, that teeth-rattling, panic-striking moment when things suddenly aren't going well. Yesterday must have been a similar feeling for automakers, given the news that sales of cars dropped 4.3% last month.
This less-than-pleasant statistic came courtesy of the Commerce Department, which released its monthly retail sales report yesterday. To be fair, overall retail sales dipped just over 1%, but once the government number-crunchers broke out the statistics by industry, it was the automobile sector that really disappointed. Worse yet, this drop follows a 3.2% gain in May sales at dealerships.
But maybe automotive companies saw it coming. After all, June also brought record-high incentives to Ford
For example, DaimlerChrysler just threatened to lay off 3,000 employees in Germany, and this on top of job cuts throughout the U.S. in recent years. Of course, one month does not a Mercedes make, but if sales don't rebound in July, this latest round of cuts will be one step closer to reality.
Ford, meanwhile, admitted two weeks ago that June sales were down 8 percent from a year ago. But with second-quarter earnings to be announced on July 20, the truck giant may not say much until then.
Then there's GM. With sales in China continuing to move along, it may be faring better than the rest of U.S. automakers, despite this recent drop. It will announce second-quarter earnings a day after Ford, and by then we should have a clearer picture of just how well things are going in Detroit.
Maybe the drop in sales is due to gasoline prices. Is it possible that all this talk about high gas prices has finally sunk in with Mr. and Mrs. Middle America? That's hard to say. But as Seth Jayson pointed out last week, foreign carmakers Toyota
Well, whatever the reason, I guess we'll soon be bombarded yet again with commercial after commercial touting zero-percent financing, great trade-in offers, and anything that dealers think will get people in the door. I can't say I'm looking forward to it, and I doubt automobile manufacturers are, either.
Want to read more about automakers and their obsession with zero percent financing? Check out:
- The Pitfalls of 0% Financing, by Robert Brokamp
Fool contributor Allen Plummer is a freelance writer in Richmond, Va., who's driven the same Jeep for the past 10 years. He does not own shares of any companies mentioned here.