2011 Chevrolet sedans are reflected in the grill of a Chevrolet truck on the lot of a dealership, in Norwood, Mass.Steven Senne/The Associated Press
The North American auto recovery skidded to a stop in May, as the crisis in Japan caused a shortage of vehicles and a slowing economy hurt sales at auto dealers.
The weak performance in one of the most important months of the year for auto companies, along with a number of signals that the U.S. and other key economies are beginning to sputter, is stoking fears that car sales will stay in a low gear for a while.
In Canada, auto dealers had their worst May since 1997. Vehicle sales fell 4 per cent from year-earlier levels, a drop caused mainly by double-digit declines at five of the six Japan-based auto makers, which have been running short of needed parts ever since the devastating earthquake and tsunami in March.
But sales also took a hit at Ford Motor Co. of Canada Ltd. and General Motors of Canada Ltd., an indication that the shortage of some models was not the only factor. Subaru Canada Inc. was the only Japan-based company to post an increase, while sales slumped 39 per cent at Suzuki Canada Inc. and 33 per cent at Toyota Canada Inc.
Sales also fell overall in the U.S. market last month, which, like Canada, faced higher gasoline prices, but also experienced a cut in incentives by major auto makers.
"It does look like there's something a bit more to this than just the impact of supply shortages in Japan," Doug Porter, deputy chief economist for BMO Nesbitt Burns said Wednesday. "There has been a step back in consumer confidence, whether because of rising gasoline prices in the month or some underlying softness in the economy."
Senior executives at some auto makers echoed that theme.
"There's been a lot of recent key data that's come in a little weaker than we expected," Don Johnson, vice-president of sales operations for General Motors Co., said on a conference call with reporters. "We continue to believe that the recovery remains on track, but clearly we also see some challenges that we need to overcome." GM's U.S. sales fell 1 per cent.
Ford Motor Co. said the seasonally adjusted annual sales rate last month was 12 million for the U.S. market, a sharp decline from the April level of 13.2 million.
"It is not surprising that our May sales were down because of a product shortage resulting from a parts supply disruption that was caused by the natural disaster in Japan," said Jerry Chenkin, executive vice-president of Honda Canada Inc., whose sales slid 15 per cent.
But some of the drop might be attributable to moves made by the car companies to beef up their profit margins. "All auto makers took advantage of the large [cuts to incentives]on Japanese models in order to raise their own prices," Barclays Capital analyst Brian Johnson said in a note to clients Wednesday.
Chrysler Group LLC bucked the trend in both countries with a 13-per-cent gain, allowing it to hang on to second spot in Canada ahead of GM Canada. U.S. sales rose 10 per cent, marking the best May since 2008 and vaulting Chrysler ahead of Honda and Toyota.
Hyundai Auto Canada also gained market share. It posted the best May sales in its history and surpassed both Honda and Toyota to grab fourth spot in the Canadian market. Hyundai had not outsold Toyota since August, 1986.
Monthly sales in Canada have returned to pre-recession levels only once since the economic recovery began and that was in March of this year.
"In the U.S., we're not even close yet," Mr. Porter said. "With another step back in May, they're now about 25 per cent below pre-crisis levels."
With files from wire services
Editor' note: Several auto makers posted sales increases in the Canadian market in May. Subaru Canada Inc. was the only one of the six Japan-based auto makers to report an increase. An earlier online version of this story and the original newspaper version of this story incorrectly stated that only Subaru posted an increase in Canadian sales. This online version has been corrected.