U.S. auto sales for Feb seen posting steep drop

By Kevin Krolicki

DETROIT, March 2 (Reuters) - When major automakers release February sales results on Monday, analysts expect to see double-digit declines from Detroit, more fallout from a slumping economy on an already battered industrial sector.

Some see the risk for results weak enough to rock the consensus that this year's expected decline in U.S. auto sales will remain limited despite the pressure from a collapsing housing market, tighter credit and rising gas prices.

"Things are getting ugly from a sales perspective," said IRN Inc analyst Erich Merkle, who sees a chance the industry's annualized sales drops to near 14.9 million vehicles, weaker than major automakers have forecast for 2008 as a whole.

"I think that will rattle a lot of people," Merkle said.

Overall, analysts expect February U.S. car and light truck sales to drop by between 6 percent and 10 percent in February from the same month a year earlier after adjusting for an additional sales day last month.

The auto sales data represent one of the first snapshots of overall U.S. consumer demand, and the projected weakness could provide more evidence for those in industry who believe the U.S. economy has already slipped into what will be later recognized as outright recession.

General Motors Corp (GM.N: Quote, Profile, Research), Ford Motor Co (F.N: Quote, Profile, Research) and Chrysler LLC are expected to be hardest hit in February. The Detroit Three stand to lose market share in a declining market and could be forced to rein in production to keep inventories from ballooning.

"The difficult environment for auto sales continues to take a much heavier toll on the Big Three," Lehman Brothers analyst Brian Johnson said in a note. "While we expect the industry's selling rate to be down overall by 10 percent in February, we expect the domestic manufacturers to post a 15 percent drop."