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The next steps automakers could take after sales drop again in April

DETROIT (Reuters) - Major automakers on Tuesday posted declines in U.S. new vehicle sales for April in a sign the long boom cycle that lifted the American auto industry to record sales last year is losing steam, sending carmaker stocks down. The drop in sales versus April 2016 came on the heels of a disappointing March, which automakers had shrugged off as just a bad month. But two straight weak months has heightened Wall Street worries the cyclical industry is on a downward swing after a nearly uninterrupted boom since the Great Recession's end in 2010. Auto sales were a drag on U.S. first-quarter gross domestic product, with the economy growing at an annual rate of just 0.7 percent according to an advance estimate published by the Commerce Department last Friday. Excluding the auto sector the GDP growth rate would have been 1.2 percent. Industry consultant Autodata put the industry's seasonally adjusted annualized rate of sales at 16.88 million units for April, below the average of 17.2 million units predicted by analysts polled by Reuters. General Motors Co shares fell 2.9 percent while Ford Motor Co slid 4.3 percent and Fiat Chrysler Automobiles NV's U.S.-traded shares tumbled 4.2 percent. The U.S. auto industry faces multiple challenges. Sales are slipping and vehicle inventory levels have risen even as carmakers have hiked discounts to lure customers. A flood of used vehicles from the boom cycle are increasingly competing with new cars. The question for automakers: How much and for how long to curtail production this summer, which will result in worker layoffs? To bring down stocks of unsold vehicles, the Detroit automakers need to cut production, and offer more discounts without creating "an incentives war," said Mark Wakefield, head of the North American automotive practice for AlixPartners in Southfield, Michigan. "We see multiple weeks (of production) being taken out on the car side," he said, "and some softness on the truck side." Rival automakers will be watching each other to see if one is cutting prices to gain market share from another, he said, instead of just clearing inventory. INVESTORS DIGEST BAD NEWS Just last week GM reported a record first-quarter profit, but that had almost zero impact on the automaker's stock. The iconic carmaker, whose own interest was once conflated with that of America's, has slipped behind luxury carmaker Tesla Inc in terms of valuation.

Lexus GX and LX future may be in doubt

With the debut of an all-new RX, Lexus is in a position for continued strong sales in the luxury SUV arena. The fourth-generation RX has grown, making room for the new NX model beneath it. But further up the ladder, things could change for the GX and LX. In an interview with Autoblog at the 2015 New York Auto Show, Lexus executive vice president Mark Templin gave some hints at the future of his brand's SUV lineup. "With NX and RX, we have a really good one-two punch in the crossover segments, and we think we can cover most of the markets with that," he said. As for the larger, three-row GX and LX models, which are built on a traditional ladder-frame chassis, things aren't so clear. Templin noted the the success of both models all over the world – the LX is the best-selling Lexus in Saudi Arabia. The same is true for sales here, he said: "We do very well with those products in the United States – GX has been a great product for us in the US for the last couple of years since its initial introduction. But the future of those vehicles longer term is in doubt because of regulations that are being driven by governments all over the world." Don't start stockpiling LX 570s in anticipation of shortages just yet. Templin didn't give any specifics; he just notes that tightening fuel economy and emissions regulations could affect product planning. In our analysis, if and when GX rides off into the sunset, Lexus still needs a midsize, three-row SUV to fill that gap. The most likely candidate for that is some variation on the RX. Whether or not that's the case, don't expect a BMW-like proliferation of body styles from Toyota's luxury division. "It creates problems. It creates complexity, that's hard for every step of the process," Templin said, nothing that too many models stresses the design department, manufacturing, and even dealers inventory selection. As for the bottom end of the lineup, Templin wouldn't comment on a compact SUV below the NX, saying "I think there are more potential options for us in the future, but we're not trying to grow the number of models we have in our lineup. It's not really what our core business is about." For now, Lexus and Templin are focused on launching the RX, which accounts for three of every 10 Lexus models ever sold. The 2016 model, available in RX 350 and RX 450h hybrid versions, goes on sale by the end of the year. Related Video:

Lexus recalls 2016 RX over knee airbag assembly

The Basics: Lexus will recall 5,000 examples of the 2016 RX 350 and RX 450h. The Problem: The driver's knee airbag module may not have been properly manufactured, and this issue could affect the airbag's deployment. Injuries/Deaths: None reported. The Fix: Lexus dealers will inspect and replace the driver's knee airbag assembly. If You Own One: Customer notifications will begin in March. More Information: Toyota spokesperson Cindy Knight tells Autoblog that this issue is not related to the upcoming Takata airbag inflator recall expansion. Related Video: LEXUS RECALLS CERTAIN 2016 RX 350 AND RX 450h VEHICLES TORRANCE, Calif., January 27, 2016 – Toyota Motor Sales, USA, Inc. today announced that it is conducting a safety recall of approximately 5,000 Model Year 2016 Lexus RX350 and RX450h vehicles. The involved vehicles are equipped with a driver's knee airbag module that may not have been properly manufactured. This could affect the performance of the airbag and increase the risk of injury in a crash. All known owners of the involved Lexus vehicles will be notified by first class mail. Lexus dealers will inspect and if necessary replace the driver's knee airbag assembly free of charge. Information about automotive recalls, including but not limited to the list of involved vehicles, is subject to change over time. For the most up-to-date Safety Recall information on Lexus, Toyota and Scion customers should check their vehicle's status by visiting http://www.toyota.com/recall and entering the Vehicle Identification Number (VIN). Safety Recall inquiry by individual VIN is also available at the NHTSA site: safercar.gov/vin. For any additional questions, customer support is also available by calling Lexus Customer Service at 1-800-255-3987. ###