(Bloomberg) -- The slump in the U.S. auto industry is showing no signs of letting up.
Sales at all six of the biggest automakers in the U.S. dropped again in April, with Ford Motor Co. and Honda Motor Co. posting the steepest declines -- about 7 percent each. To make matters worse, each company's figures fell short of what analysts had estimated, sending the industry to its fourth straight down month after a record sales year in 2016.
The April reports immediately reverberated across the stock market, with Ford closing at its lowest level in more than four years. The selloff also spread to auto-parts makers and car retailers. Analysts said the grim numbers indicate the industry will need to boost discounts and cut production to address swelling inventory on dealer lots, particularly as credit tightens.
“It was a low-interest party, but lenders have pulled back,” Maryann Keller, an auto industry consultant in Stamford, Connecticut, said by phone. “They have made it more expensive for the borrower to get credit. Some people can't get financed and for others it's too expensive.”
BorgWarner Inc. and Delphi Automotive Plc were among auto-supplier shares that drifted lower, while retailers including AutoNation Inc. and Asbury Automotive Group Inc. also slumped on a day when the S&P 500 ticked up 0.1 percent.
“This will add to investor angst and the belief that production cuts are needed,” Joe Spak, an analyst at RBC Capital Markets, said in a report Tuesday. “This adds fuel to the fire to the thesis that higher incentive spending is needed to support demand and that even that impact is waning.”
The annualized pace of U.S. auto sales, adjusted for seasonal trends, slowed to 16.9 million in April, missing analysts' average estimate for 17.1 million. A year ago, the selling rate was 17.4 million.
Industrywide deliveries are down 2.4 percent so far this year compared to the same period last year, according to researcher Autodata Corp. The four-month slump reinforces estimates for the U.S. auto market's first annual contraction since 2009, the year GM and Chrysler reorganized in bankruptcy court.
General Motors Co. finished the month with about 100 days' supply of inventory, more than the roughly 70 days the company typically likes to carry.
The largest U.S. automaker has scheduled about 13 weeks of downtime at North American plants during the third quarter, Chief Financial Officer Chuck Stevens told analysts last week. While the bulk of the idled production is related to retooling factories to make new or redesigned SUVs and pickups, the automaker is also trimming output of the Corvette sports car at its plant in Kentucky.
Industry demand is declining even as automakers ratchet up discounts. Spending on incentives last month through April 16 reached a record for the month of $3,499, according to J.D. Power.
“Sales look soft,” David Whiston, an auto analyst at Morningstar Inc., said by phone. “I told clients that 2016 would be the end of growth, and it looks like just that.”
--With assistance from Keith Naughton John Lippert and Gabrielle Coppola
To contact the reporters on this story: Jamie Butters in Southfield, Michigan, at jbutters@bloomberg.net, David Welch in Southfield at dwelch12@bloomberg.net.
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Anne Riley Moffat
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