Automakers expected to record one of 2009's best monthly sales gains

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U.S. auto sales in October are expected to provide more evidence that the worst of the industry's four-year downturn has passed, while leaving open doubts about the speed and strength of the recovery.

Analysts and executives expect U.S. auto sales will be above 10 million vehicles on the annualized basis tracked by the industry.

That would mark the strongest result of the year with the exception of July and August, when car sales got a short-lived boost from the U.S. government's "Cash for Clunkers" trade-in incentives.

"The industry is getting some legs under it without the stimulus of Cash for Clunkers," General Motors Co GM.UL sales analyst Mike DiGiovanni said. "That said, this isn't great," DiGiovanni said. "These are still levels we haven't seen since the early 1980s."

Auto sales provide a snapshot of American consumer demand, although the sector has badly trailed other categories of spending since the middle of 2005.

An October sales total of over 10 million vehicles would mark an improvement from the September sales rate of 9.2 million. But it would also represent a single-digit percentage drop from the 10.8 million sales rate a year earlier.

Sales have tumbled 27 percent so far this year, underscoring concerns that any recovery for the battered auto sector is likely to be slow and uneven.

"We can feel that there is demand, but it is very cautious demand," Asbury Automotive Group Inc Chief Executive Charles Oglesby told Reuters.

The sixth-largest U.S. dealership chain forecast 2010 U.S. auto sales of 10.5 million units.

U.S. light vehicle sales have dropped severely in the last two years and are expected to total of just above 10 million vehicles in 2009, compared with 16.1 million in 2007.

The consensus view among automakers and leading forecasting firms such as J.D. Power and CSM Worldwide is that sales will rise at least 15 percent to above 11.5 million units in 2010.

Analysts said the larger-than-expected drop in consumer confidence in October could dispel any remaining hopes of a substantial recovery taking hold this year.

"Disappointing consumer confidence number is likely to raise investor doubts about the magnitude of a vehicle sales recovery over the next several months," Wells Fargo Securities said in a research note.

GM SEEN UP, CHRYSLER DOWN

GM's DiGiovanni said the top U.S. automaker is on track to post year-over-year U.S. sales growth in October, the first monthly increase in 21 months.

"We're not declaring victory. But it looks like October could conceivably be our third straight month of market share increase," he said.

Ford Motor Co's U.S. sales chief Ken Czubay said it was unclear if Ford could eke out a sales gain for October, saying that would depend on the strength of sales this weekend, traditionally the busiest time of the month in showrooms.

JPMorgan analyst Himanshu Patel expects GM to report a 2 percent rise in sales, Ford Motor Co to post a 5 percent fall in sales and Chrysler Group to post a 28 percent decline.

Edmunds.com also sees a 2 percent increase in GM sales but expects Ford and Chrysler to post sales decline of 7 percent and 34 percent respectively.

The forecasting firm expects Toyota Motor Corp to report a 10 percent decline in sales, while forecasting flat sales for Honda Motor Co and a 9 percent increase for Nissan Motor Co.

Hyundai Motor Co, the only major automaker to post higher sales in the slumping U.S. market, is projected to post 33-percent growth, according to Edmunds.com.

Both GM and Chrysler are struggling to reverse a long-running slide in market share after emerging from government-funded bankruptcies earlier this year. Analysts see a bigger risk for Chrysler due to its aging, truck-heavy lineup and a dearth of new model launches this year and next.

Chrysler Chief Executive Sergio Marchionne plans to announce a five-year business plan for turning around the No. 3. U.S. automaker on November 4 that will feature plans for a new range of smaller cars for the U.S. market.

(Reporting by Soyoung Kim; Editing by Derek Caney)

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