General Motors, Ford U.S. Sales Probably Fell in May

June 1, 2005; Bloomberg reported that General Motors Corp. and Ford Motor Co., the largest U.S. automakers, may report today that May sales fell from a year ago and their U.S. market share slump continued amid gains for Toyota Motor Corp. and Nissan Motor Co.

GM and Ford, with combined U.S. market share of more than 40 percent, will post lower car and light truck sales, according to each of five forecasters surveyed by Bloomberg. Overall industry sales are expected to drop to an annual average rate of 16.8 million cars and trucks, from 17.7 million in May 2004.

The year's fifth-straight month of declining market share for GM and Ford may prompt further production cuts. It may also raise pressure on GM to restructure its automotive operations, after a $1.1 billion first-quarter loss and a downgrade in its debt to ``junk'' level by Standard & Poor's and Fitch Ratings.

``Ever seen erosion when water runs down the hill and you can't stop it? It's going to be more of the same with the domestics continuing to lose ground and the Asians continuing to gain ground,'' said Frank Ursomarso, a Wilmington, Delaware, dealer. He sells GM's Pontiac and GMC brands, Ford's imported Volvo and Jaguar cars, and BMWs from Munich, Germany-based Bayerische Motoren Werke AG.

Employee Discounts

To help boost sales, GM will announce today that its employee-discount program will apply to all customers through July 5, said dealer Ursomarso. GM declined to comment on the plan, which was reported in the Detroit Free Press.

Ford will provide revised second-quarter production plans today and announce its third-quarter outlook for the first time, spokesman George Pipas said in an e-mail interview. The Dearborn, Michigan-based company cut North American production 9.9 percent in the first quarter and had projected a 4.8 decline for the current quarter.

``We are still at very, very high, very healthy numbers,'' said Lexington, Massachusetts-based Global Insight Inc. auto forecaster Rebecca Lindland, who predicted May sales ran at an annualized rate of 16.7 million cars and trucks. ``The reason that people don't appreciate that number as much is because GM and Ford are losing market share, and of course that reflects on Wall Street.''

GM shares have fallen 21 percent this year to $31.53. The yield on GM's 8.38 percent bond, maturing in 2033, is 11.08 percent, compared with 7.85 percent yield at the beginning of the year. GM spokeswoman Deborah Silverman said she doesn't know if GM will discuss production plans. GM reduced first-quarter output by 10 percent and had forecast a 12 percent cut in the second quarter.

Trimming Inventory

GM, based in Detroit, and Ford will reduce third-quarter production to trim dealer inventories of slower-selling sport- utility vehicles, said Ronald Tadross, an analyst for Banc of America Securities in New York.

Through April, for example, GM's Chevrolet Tahoe sales were down 26 percent, and sales of Ford's Explorer SUV fell 22.5 percent. ``SUV sales are as bad as they're going to get,'' said David Healy, an analyst with New York-based Burnham Securities.

U.S. demand for truck-based SUVs, such as the Tahoe and Explorer, accounted for just 12 percent of new vehicle sales in April, the lowest level since May 1996, according to the Power Information Network, the forecasting unit of J.D. Power and Associates of Westlake Village, California.

New Products

Ford's May sales may have been helped by the Freestyle, a car-based SUV, and the Five Hundred sedan, both introduced late last year, said Jim Sanfilippo, executive vice president of Automotive Marketing Consultants Inc. in Bloomfield Hills, Michigan.

GM may gain momentum with new cars such as the Pontiac G6 sedan, analysts said. That could continue with the new Chevrolet HHR, Pontiac Solstice and redesigned Chevrolet Impala, analysts said.

``The Solstice is shockingly good, and the HHR, while critically a few years late, should do very well,'' Sanfilippo, said.

The 10 Asian automakers that compete in the U.S. held a record 36.5 percent of the market this year through April, 2.3 percentage points more than a year earlier. The gains were led by Toyota and Nissan of Japan and Hyundai Motor Co. of South Korea.

Asian Gains

In contrast to GM and Ford, Toyota and Nissan last month each raised sales more than 17 percent, according to Jesse Toprak, an analyst with Edmunds.com, an auto industry data service in Santa Monica, California. His figures are adjusted to reflect two fewer ``selling'' days in May 2005 than in May 2004. The percentage change based on projected units sold would be about 10 percent.

``The three big Japanese automakers currently have great strength in each of their marques, while the domestic Big Three are burdened with many weak units,'' Toprak said in an e-mailed statement. ``In fact, the Cadillac, Chrysler and Mercury brands are the only domestic nameplates we expect will have May 2005 sales outpace May 2004.''

GM's U.S. sales declined 4.9 percent through April, and its market share fell to 25.4 percent. Toyota's market share increased to 13.3 percent.

Sales of GM in Europe are rising. Through April, the carmaker's sales rose 1.1 percent to 576,245 vehicles and its market share increased to 10.8 percent from 10.4 percent in the 25 member countries of the European Union as well as Norway and Switzerland. Over the same period, Toyota's European sales fell 2 percent to 295,779 cars while its share was unchanged at 5.5 percent