By Michael Ellis
DETROIT, March 27 (Reuters) - The war in Iraq hurt U.S. auto sales in March but the impact on the industry, which accounts for about one-fifth of U.S. retail sales, has been milder than many analysts had feared.
New car and light truck sales fell 8 percent in the first four days of the war, far from the sharp plunge during the ground phase of the Gulf War in 1991 or immediately after the Sept. 11, 2001 attacks on the United States, according to one study by J.D. Power and Associates.
"One could easily imagine a much worse case than (has) developed," Robert Schnorbus, J.D. Power's chief economist, told Reuters.
"It could yet get worse, but for the period for which we have some insight, the impact has been relatively small."
Most analysts expect March vehicle sales, which leading automakers will report on Tuesday, to fall a few percentage points from year-ago levels to a seasonally adjusted annual rate of between 15.2 million and 15.7 million vehicles.
That would be down from 16.7 million in March 2002, but most likely better than the 15.3 million in February. Sales fell in January as well, as the new year got off to a soft start due to the weak U.S. economy, unemployment, and uncertainty surrounding the war.
Heading into the war, some analysts said that U.S. new vehicle sales could drop to their weakest levels in five years, due the "CNN effect" of people staying home and watching the conflict on television.
But with the advent of warmer weather, after bitter February blizzards in many parts of the United States, people apparently tired quickly of continuous TV coverage of the U.S.-led effort to oust Iraqi President Saddam Hussein.
"People keep trying to make this '91 and it's not," said Bank One Corp. Chief Economist Diane Swonk. "To think sales are at these levels given the buy ahead that's happened, it's really amazing."
Swonk was referring to the exceptionally high sales incentives, which since the Sept. 11 attacks have kept U.S. vehicle sales above trend levels and pulled many car and truck sales ahead from the future.
The high incentives, which analysts estimate averaged $2,225 per vehicle in February, have continued to attract many consumers into dealerships.
"Despite all these concerns about the (war) uncertainty, the consumer's ability to buy now is not too bad," Schnorbus said.
However, automakers have conceded that incentives -- including interest-free loan deals -- are failing to attract as many consumers as they did in months past.
Unlike the past several months, there has been no mid-month escalation of incentives, or a heating up of the price war waged by Detroit's Big Three automakers.
NO EFFECT?
The head of Volkswagen AG , Europe's biggest carmaker, said on Wednesday that the war had so far had no measurable impact on the global auto industry.
"Until now there have been no noticeable movements either upwards or downwards," VW Chief Executive Officer Bernd Pischetsrieder told reporters at a suppliers fair in Germany.
Pischetsrieder also said VW had not suffered from any backlash by U.S. shoppers against German products due to political tensions arising from the German government's opposition to the war with Iraq.
George Fowler, general manager of the Superior Buick-Pontiac-GMC car and truck dealership in Dearborn, Michigan, said that sales so far this month have been better than previously expected.
"I don't think the war is having a tremendous impact," he said. During the 1991 Gulf War, "there was nobody walking in. Everybody was at home glued to their TVs. And that's not the case this time," he said.