Worries abound as automakers report weaker car sales

Global automobile sales have recovered in the wake of the recession, but many carmakers are still struggling as the effects of the supply chain crisis emanating from Japan continue to crimp supplies.

The so-called American Big Three automakers, General Motors, Chrysler and Ford, have all reported sales and market share gains over the past two years. However, the scorching pace of sales gains has slowed in the wake of the natural disasters that struck Japan on March 11. 

Japanese companies are responsible for the production of more than 20 percent of the world's supply of critical electronic components used in automobile manufacturing, but many such businesses are still struggling to overhaul their strategic sourcing practices as they search for additional suppliers.

Automakers based in Japan have been adversely affected by the supply chain crisis. Nissan, Toyota and Honda, for example, had to contend with structural damage resulting from the 9.0-magnitude earthquake and subsequent tsunami that struck the island nation. 

A large number of factories were damaged as a result and, while sales and production capacity have begun to recover, Toyota and Honda reported plummeting sales in their most recent fiscal quarters.

During the month of July, sales of Toyota car models declined by 22.7 percent. Honda similarly reported a drop, with sales dropping 28.4 percent, according to a report from The New York Times.

U.S. automakers have weathered the crisis skillfully as they overhauled their business models to achieve manufacturing cost reductions. Still, while U.S. automakers were experiencing double-digit sales growth for the better half of the past 16 months, sales figures this year have tapered off. 

GM reported sales gains of 7.6 percent in July. What's more, Ford said its sales edged up only 6.1 percent. Chrysler, however, said sales jumped 20.1 percent in July, but the chief of the company's U.S. sales division, Reid Bigland, affirmed the market has suffered since April.

"The recovery is clearly in a stall mode," Nationwide Insurance chief economist Paul Ballew asserted. "It's hard to see sales sprinting forward without some help on job and income growth. There’s a lot of wind that’s really out of the consumer’s sails right now."

Nevertheless, industry analysts are confident car sales will recover over the latter half of this year as supply disruptions continue to abate. Uncertainty, however, is weighing on public officials and economists as they worry that the slower growth could be indicative of yet another slowdown in the economic recovery, MarketWatch reports.

"Some pricing and supply issues are still restraining market growth and there is also an underlying question of whether there are larger economic issues at play," Edmunds.com chief economist Lacey Plache said. "Exactly how consumers react to next month’s summer sales events will go a long way toward answering that question." 

Still, official data released by the U.S. Department of Commerce over the past few weeks has reinvigorated concerns among economists as to whether the U.S. is heading toward a so-called double-dip recession. GPD growth during the first quarter of this year was downwardly revised to 0.4 percent, with the overall measurement of the U.S. economy's strength accelerating to only 1.3 percent during the second quarter. 

With the Institute of Supply Management reporting that growth in the U.S. manufacturing sector declined in July, many economists are anxiously awaiting to see how U.S. manufacturers fare over the coming months.

"A more pressing concern involves the overall weakness in the economy which is contributing to the less than stellar bounce back," Ballew said. "Factory orders should not be ignored either. The manufacturing sector’s bounce back has leveled off and keeping an eye on factory activity during the second half will be a key indicator on the expected acceleration."