By Joseph White and Ankit Ajmera
DETROIT (Reuters) - Shares of the Big Three Detroit automakers rose on Friday despite lackluster August sales, with investors focusing on a likely surge in demand as residents of the U.S. Gulf Coast replace flood-damaged cars and trucks.
Overall U.S. car and light truck sales fell in August to a seasonally adjusted annual selling pace of 16.03 million vehicles, according to WardsAuto, down from a 17.13 million vehicle pace a year ago. U.S. auto sales have been slowing for much of the year.
Still, analysts focused on the potential for Detroit automakers to cut inventories and stabilize used vehicle prices as Gulf Coast residents must replace tens of thousands of vehicles ruined by flood damage. Hurricane Harvey slammed into Texas last week and the storm caused historic flooding in Houston, the fourth largest city in the United States.
Ford sales fell 2.1 percent in August. Mark LaNeve, Ford Motor (NYSE:F) Co's U.S. sales chief, told analysts that following Hurricane Katrina in 2005 "we saw a very dramatic snapback" in demand.
It was not clear how many vehicles in the Houston area will be scrapped, LaNeve said, saying he had seen estimates ranging from 200,000 to 400,000 to 1 million. Ford's Houston dealers may have lost fewer than 5,000 vehicles, he said.
Ford is the No. 1 automaker in the Houston market with 18 percent share, according to IHS Markit. The company plans to ship used vehicles to Houston dealers, and has "every indication we would have to add some production" of new vehicles to meet demand, LaNeve said.
Investor concerns about inventories of unsold vehicles and falling used car prices have weighed on Detroit automakers' shares most of this year. Now, automakers can anticipate a jolt of demand from a big market that is a stronghold for Detroit brand trucks and SUVs.
"It's got to be a positive for the industry," LaNeve said.
Investors appeared to agree. General Motors Co (NYSE:GM) shares rose as much as 3.3 percent to their highest since early March, and were trading up 2.9 percent ahead of the close at $37.60. Ford was up 3.3 percent at $11.39 and Fiat Chrysler Automobiles NV 's U.S.-traded shares were up nearly 5.2 percent $15.90, hitting their highest in more than five years.
The Detroit automakers posted mixed August U.S. sales, with GM up 7.5 percent and Ford and Fiat Chrysler down. Japanese automaker Toyota Motor Corp improved sales by nearly 7 percent, Honda Motor Co's sales fell 2.4 percent.
GM got a lift from robust sales of crossovers across its four brands. The largest U.S. automaker by sales plans to move used vehicles into Houston, and expressed confidence it can reduce inventories to 850,000 or fewer vehicles by year end.
Big auto dealership chains also intend to move vehicles to Houston from other markets as residents get insurance checks for drowned cars.
"Hurricane Harvey did have an adverse effect on deliveries during the last week of August for every automaker but the key U.S. economic fundamentals remain supportive of strong vehicle sales," GM Chief Economist Mustafa Mohatarem said in a statement.
Fiat Chrysler's U.S. vehicle sales fell 11 percent to 176,033 units. The company partly citing a planned 23 percent cut in sales to rental car companies.
U.S. consumers kept migrating toward sport utility vehicles and pickup trucks. Toyota sold more than 43,000 redesigned RAV4 compact SUVs, up nearly 26 percent from a year ago. The RAV4 has displaced the Camry sedan as Toyota's best-selling vehicle year to date.