US auto slump moves beyond the Big Three

Fierce competition is shaking up the automotive marketplace in ways that go beyond a simple divide between Detroit and foreign brand names.

It may come as no surprise, for example, that Toyota posted the biggest sales gain in May, but consider the other major company that surged forward: General Motors.

Fuel-efficient cars helped both companies – that's right, GM too – rack up sales that together captured 41 percent of the US market.

Not faring as well in recent weeks: Ford Motor Co. and Japan's second biggest automaker, Honda.

Ford's vaunted F-Series pickup, long the chart-topper among US cars and trucks, is now eating dust from GM's newly revamped Chevrolet Silverado. The Chevy trucks sales have surged, thanks to a package of power and fuel efficiency that beats many rivals.

Honda's road is less bumpy than Ford's, but sales of its Accord sedan are down 14 percent in the past year. Honda's overall volume is up a bit, but in today's hotly contested car market, such gains are hard won.

"Of the big six, the manufacturer that increased incentive spending the most over the last year and last month was Honda," says industry analyst Alex Rosten of Edmunds.com, a major car-shopping website, based in Santa Monica, Calif. "It kind of goes to show that incentives are necessary in today's automotive climate."

That climate has grown more difficult over the past year, for several reasons.

Rising mortgage rates, and a slump in the housing market, is squeezing some consumers' purchasing power when they shop for cars, analysts say.

Gas prices have hit new highs above $3 per gallon in recent weeks, and have been elevated long enough for car shoppers to wonder whether they'll ever hit $2 again. That, too, is affecting the choices consumers make at the dealership.

People aren't just looking for good fuel economy. They're often looking for a car that will fit a tightened household budget.

In response, carmakers are trying to lure buyers with better lending terms.

"The incentive spending that's going on is focusing more on leasing and financing, rather than cash rebates," says Mr. Rosten.

At the same time, a solid US job market means that car shoppers are still looking for more than just low payments and high mileage.

That tilts the playing field toward carmakers rolling out good new designs.

"The market's becoming more competitive," says Tom Libby, an auto analyst in Troy, Mich., at market-research firm J.D. Power and Associates. "There's a big contrast among the companies' performances."

The overall pie has been shrinking slightly, with sales on track to remain relatively healthy, above 16 million units for the year in the US.

But compared to this time last year, 2007 unit sales are down 1.3 percent.

In this environment, most of the major carmakers are tacking on larger incentives to move vehicles off the lot.

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