DETROIT — U.S. car sales may be slowing, but the profit engines of Detroit’s Big Three auto makers are still in high gear.
General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles all beat Wall Street’s expectations last week when they reported first-quarter earnings, mostly because of strength in the North American market. All three kept their full-year earnings forecasts intact, a signal they don’t expect the wheels to fall off.
That comes despite clear signs overall demand for passenger vehicles is weakening. April is expected to mark the fourth straight monthly decline in U.S. vehicle sales when the industry reports volumes on Tuesday, raising the likelihood that 2017 will end a seven-year run of increases.
Industry observers say they don’t expect a collapse in sales, even if demand drifts below record levels hit last year. “Total sales are still strong from a historical perspective and the decline is very gradual,” said Jessica Caldwell, an analyst at Edmunds.com, an auto-research firm and car-shopping website. “It shouldn’t really be seen as alarming.”
Auto makers say they’ll stay disciplined and trim production levels to reflect weaker demand instead of cutting prices to keep their factories humming.
GM, Ford and Fiat Chrysler are in a relatively stronger position than some of their foreign-based rivals because they rely less on sales of sedans, which are in free fall as buyers switch to crossover wagons, SUVs and pick-up trucks. U.S. brands specialize in those vehicles, which tend to offer high profit margins.
“The industry shift that we’re seeing around the world from cars and [into] SUVs plays to our strengths,” said Mark Fields, Ford’s chief executive officer, on a conference call with analysts on Thursday.
The shift toward light trucks — a category that includes pickups, SUVs and crossover wagons — is helping auto makers keep prices high overall, even as they dole out bigger discounts on cars. In recent months, light trucks have accounted for more than 60% of total sales volume. J.D. Power, a market-data provider, says the average price paid by buyers from the start of the year through mid-April was a record $31,380.
While all three Detroit auto makers posted profits that surpassed Wall Street analysts’ expectations in the first quarter, Ford’s earnings dropped by more than a third compared to the same period last year, when it debuted the latest iteration of its F-150 truck model.
Detroit auto makers’ growing exposure to those more expensive and typically less fuel-efficient cars and trucks could prove disastrous if consumers become more sensitive to gas-pump and sticker prices.
For two years now, auto-industry insiders have been girding for the end of an unusually long upward sales cycle, which began in 2010 as the U.S. was emerging from the Great Recession. Tame gas prices, cheap credit and pent-up demand from consumers who put off car purchases in the bad times have converged to fuel the run.
Clouds have started to appear on the horizon, including rising discounts, cratering used-car prices and overflowing dealership lots. Concern spread when March sales dipped to a seasonally adjusted annual rate of 16.6 million, the slowest in two years.
“The competitive intensity is increasing,” Fiat Chrysler CEO Sergio Marchionne said on a call with analysts.
Mr. Marchionne said he is watching North American inventory levels “like a hawk,” but that he doesn’t expect spending on sales incentives to spark a price war like the one hat started in 2007 and sent the industry into a tailspin. “We’ve all collectively developed enough sense now not to cause repetition of the problem that we saw” a decade ago, he said.
Concern about rising spending by auto makers to maintain sales growth may be overblown, Barclays Capital said in a recent research note. Industry incentives as a percentage of average transaction prices came to 11.2% in the first half of April, the lowest level since June, the brokerage said. “A big driver of the improvement is GM, which is pulling back on incentives despite elevated inventories,” it said.
In recent months, market watchers have pointed to GM’s inventory as among the most visible signs of trouble. The nation’s largest auto maker ended March with a 98-day supply of vehicles, versus 71 days a year earlier.
GM finance chief Chuck Stevens told analysts the company built up stocks of some SUV models ahead of scheduled down time at several factories this summer and fall, and said inventory will return to normal later in the year. He said that even with more discounts, price levels remain healthy.
“It’s not like we’re sitting and waiting for a downturn,” Mr. Stevens said. “Day to day, we’re very focused on acting like we’re in a downturn” by cutting costs and trimming vehicle production to meet demand, he said.
Write to Mike Colias at Mike.Colias@wsj.com and Chester Dawson at firstname.lastname@example.org