GM expects September U.S. vehicle sales to slow

DETROIT, Sept 18, 2002- Reuters reported that General Motors Corp. <GM.N>, which expects U.S. vehicle sales to slow in September, has warned that its own sales will be hit by a lack of older 2002 models.

GM, the world's largest automaker, took its offer of zero percent financing off its depleted inventories of 2002 models earlier this month, but added them for 3-year loans on its new 2003 models. Ford Motor Co. has higher inventories left of 2002 models, and has extended its offer of zero percent financing on many of its cars and trucks to sell them out.

"The industry looks to be still reasonably strong, down from August, which I think was exceptional," GM Chief Financial Officer John Devine told Wall Street analysts at a Credit Suisse First Boston automotive conference conference late on Tuesday.

"We're going to see some softness in GM sales in September because we're out of '02 models. We basically sold those out in August," Devine said. "Our competitors still have a lot of '02s and we're selling against that as '03s. The lack of '02s will hurt us for a month or so in this new model year."

Industrywide, U.S. vehicle sales in August hit their highest levels since last October, fueled by generous incentives on 2002 models, as dealers and automakers tried to clear space for the arrival of the new 2003 models.

Devine said that GM expects to cut its automotive material costs in North America by 3 percent to 3.5 percent this year, likely shy of its target of 3.5 percent.

"Our forecast is not to get to total 3.5 (percent), it was a tough target, but we think we can get to 3.0 to 3.5 (percent). That would be record performance for us, and we think there's more to come," Devine said.

Devine said that GM's European operations, which have been losing market share and money, is meeting its targeted costs cuts, but having difficulty hitting its revenue targets.

"We have to get the revenue where we want it to be to really make a dent in the profitability," he said.

When asked if GM Europe would break even in 2003, Devine said that he would lay out the target for Europe in January.

GM is targeting a 3.5 percent cut in Europe from its automotive material costs, and expects to reach 2.5 percent to 3.0 percent, Devine said. "This again will be record performance for us," he said.

Devine said that fixed costs are expected to remain steady this year, despite the added costs of overtime staffing to meet the better-than-expected U.S. vehicle sales.