Auto industry disappointed with slow sales acceleration

Greg Sutliff was expecting a lot more from the auto recovery. This Chevrolet dealer in Harrisburg, Pa., recalled that four or five months ago he thought March would look pretty good in terms of sales.

''We had looked for a 20 to 30 percent improvement. And we got a 5 to 10 percent improvement,'' he says. ''We are disappointed, but we are not discouraged.''

This last comment seems to echo the general attitude of auto analysts and executives, who now have the first half of the new model year behind them. They had expected stronger sales by now, but the results so far are disappointing. For March, total domestic car sales were up 3.8 percent from the same month last year, figures released by the American automakers this week show.

''You would be hard pressed to argue that there has been any recovery at all, '' says John Hammond, an auto analyst at Data Resources Inc., in Lexington, Mass. Mr. Hammond says auto sales are still hovering at the seasonally adjusted 6 million-a-year mark, ''while for the last 2 1/2 years the average has been 5.8 million units. . . . What we've seen in the last several months is not that different,'' he maintains.

Although production is up significantly from the last quarter in 1982 and some auto workers have been recalled, Mr. Hammond says the new activity ''has nothing to do with market demand.'' Most of it has to do with the managing of inventories, he said. Both General Motors and Ford recently pared back slightly on April production.

To stir up demand, the automakers had been offering 11.9 percent financing. The 11.9 percent ended in March, but April and May will see new incentives - 9.9 percent financing on compacts, subcompacts, and trucks, the vehicles that dealers are having trouble moving. At midweek, American Motors Corporation was the last of the Big Four to match the new rates.

But despite the end of the 11.9 percent package, there ''wasn't any crush or rush to (buy) at the last moment,'' says GM's Robert Lund, vice-president of sales and marketing. ''If we were the only people in town that had that rate, you can be sure you would have seen an upsurge.''

Maryann Keller, an auto analyst with Paine Webber Mitchell Hutchins Inc., says the cost of autos, including financing, is still too high for people below the upper-income brackets. ''We have a distorted market. The people purchasing cars are in higher-income households. You have high sales in Buick and Cadillac, while the Chevrolet manager wonders whether he shouldn't go on a long vacation.''

Ms. Keller adds that since the improvement in financing terms isn't an adequate incentive, what is needed is ''enough overall economic improvement to give the $25,000 a year [worker] encouragement to take out a four-year loan.'' Industry sales for March were ''a few percentage points below'' what Ms. Keller expected - and she considers herself to be in the ''camp of slow, steady recovery'' already. The recovery will be ''a very, very slow climb,'' she says.

Although analysts wonder about the effectiveness of the financing, Detroit can't drop it. ''It prevents the situation from deteriorating,'' says Wesley Stuchlak, an auto analyst at Chase Econometrics.

Mr. Stuchlak agrees the sales trend has been ''flat.'' With interest rates still high, unemployment barely winding down, and consumer income gains increasing ''at a very slow pace,'' he sees spring sales only slightly increasing beyond the current 6 million trend. But in the third quarter ''sales will go up to about 7.3 million units [on an annual basis] - that's when we're looking for a pretty sizable recovery,'' he forecasts. Ms. Keller feels this forecast is too optimistic.

Despite an auto recovery that is dragging its heels, Detroit is still optimistic. ''We would have liked more [sales],'' says GM's Mr. Lund, ''but we are headed in the right direction.'' He points out that GM's March car sales were up 19.3 percent over February and 27.8 percent over January.

At Chrysler, sales for March were up 13 percent over last year, and at Ford sales rose 3.4 percent. But no one is happier than AMC, whose Renault Alliance car sales are zipping along. ''We are very pleased with the performance,'' says Steven Harris, an AMC spokesman. ''Overall sales were better than we expected, and the Alliance has gone up every month since it was introduced.'' The company's sales in March were up 121 percent over a year ago, and its market share has inched up to 2.6, compared with 1.5 percent last year.

But even at AMC, where the sales picture looks bright, the talk is of only ''gradual'' improvement in the auto industry. And this pervasive attitude has flown from Detroit to Wall Street.

According to analysts, auto stocks - especially GM stock - have been performing below the market since December. Until that point, they had been riding high on the bull market.

Some of the analysts cite poor sales as the reason. Ms. Keller, however, figures that ''it has more to do with the stock market than with car sales themselves.'' And, she adds, the GM stock may be suffering from recalls and brake and axle problems recently identified on some X- and A-cars.