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Newswire

U.S. auto sales seen climbing in July vs. June

By Michael Ellis

DETROIT, July 28 (Reuters) - High sales incentives and growing consumer confidence likely boosted U.S. new car and truck sales in July to their strongest levels this year, analysts said.

U.S. sales are expected to range between a seasonally adjusted annual rate of 16.7 million to 17.2 million vehicles when automakers report results on Friday, up from 16.4 million in June, according to a survey of analysts by Reuters.

However, compared with last July's annual rate of 18.1 million, the second-strongest month of 2002, this July's sales are expected to fall about 5 to 7 percent.

"Although it's invisible in the year-to-year comparisons, a modest and somewhat irregular recovery in U.S. vehicle sales has developed since February," Burnham Investment Research analyst David Healy said in a report.

"Excepting only May, each month's annual selling rate has topped the previous month's since February, when the rate was 15.7 million," he said.

General Motors Corp. , Ford Motor Co. and the Chrysler arm of DaimlerChrysler AG are all expected to post lower sales than last year's strong levels, despite ratcheting up sales incentives slightly in July.

Automakers offered sales incentives averaging nearly $4,000 per vehicle in July, according to auto sales tracking firm CNW Marketing Research of Bandon, Oregon.

"In the last 10 days, new cars have really picked up because of incentives," said Gary Gilbert, a sales manager with Hank Graff Chevrolet in Davison, Michigan. "People are trying to go (with a trade-in) from a 2001 car to a 2003 with lower payments because of all these incentives."

Those incentives sapped second-quarter earnings at the traditional Big Three automakers. Chrysler lost $1.1 billion in the second quarter, while GM and Ford's North American automotive units both reported sharply lower profits.

Strong sales in July could help Detroit's automakers cut their fat inventories of unsold cars and trucks, rather than hurt profit by scaling back production, analysts said.

"Despite the high incentives, we don't expect production cuts beyond those already announced," Goldman Sachs analyst Gary Lapidus said in a research note. "Rather, we expect higher incentives, and resulting higher sales, and/or ever more bulging inventories."

GM's chief financial officer, John Devine, said earlier this month the industry could see sales incentives begin to moderate and slow their ascent.

Japan's major automakers, Toyota Motor Corp. , Honda Motor Co. and Nissan Motor Co. Ltd. , are generally expected to add to the gains in U.S. market share they have recorded over the past few years.

Since the beginning of the year, the Big Three U.S. automakers have lost nearly 1.5 percentage points of U.S. market share, mostly to Toyota and Honda.