June 2006 US Auto Sales- Ford, Chrysler, GM and Nissan Sales Down, Toyota Up

DETROIT, July 3, 2006; Reuters reported that Ford Motor Co. and Daimler Chrysler AG on Monday reported lower June sales, citing high gasoline prices and slower sales of trucks and sport utility vehicles, signaling a weak start to the summer season.

Sales for Toyota Motor Corp., which has eclipsed DaimlerChrysler to become the third-largest player in the U.S. auto market, shot up 14 percent.

Toyota has taken larger share of the contracting U.S. market as consumers have been drawn to its vehicle line-up, which trails only Honda Motor Co. in average fuel economy.

"Fuel efficient products continue to drive the market, even as consumers are likely becoming acclimated to today's fuel prices," said Toyota Motor Sales Executive Vice President Jim Lentz.

The Detroit-based automakers, meanwhile, have seen their market share erode as American consumers pull away from trucks and SUVs -- a segment they dominate.

General Motors Corp. also reported a sharp decline in June sales on Monday afternoon, largely because of comparison to an unusually strong performance last year when the automaker rolled out an employee pricing offer that touched off a summer price war in Detroit.

The weak sales numbers come with GM's performance under renewed scrutiny and the board of the world's largest automaker under pressure to consider a three-way alliance with Renault SA (RENA.PA: Quote, Profile, Research) and Nissan Motor Co.

Ford's June sales dropped 7 percent, while DaimlerChrysler's sales plunged 13 percent in June.

Both companies were hurt by declines in sales of trucks and SUVs, a category that has been hit hard by higher gas prices and more expensive financing because of higher interest rates.

Sales of Ford's Explorer, the company's best-selling SUV, dropped by 36 percent in June, while sales of its larger Expedition were down 46 percent. "There's no question that higher gas prices have hurt demand for these products," said Ford sales analyst George Pipas.

Analysts expect overall June sales to be between 16.0 to 16.5 million vehicles on an annualized basis, up slightly from May, but down from a year earlier. A final industry-wide sales total will be available later on Monday.

Auto industry executives have said there were signs that consumers were waiting for better deals in July, when both GM and Chrysler rolled out new discount offers. Ford's Pipas said that sales had slowed appreciably later in the month, typically the busiest sales period for auto dealers.

CHRYSLER INCENTIVES UP, GM SEEN WEAK

The weak June results capped a rough quarter for Chrysler, the only Detroit-based automaker to post a profit in the first quarter. Chrysler, sitting on an unsold inventory of over two months of vehicles as of end May, has had to resort to the biggest discounts of any of the automakers this year.

Daimler-Chrysler's first-half U.S. sales were down 5 percent, as a 17 percent gain for Mercedes-Benz was more than offset by the 3 percent drop for the bigger-volume Chrysler brand.

Over the weekend, Chrysler attempted to shore up its flagging sales with the most aggressive discount offer of the year, combining employee-level pricing with zero-percent financing and a 30-day money back guarantee.

GM, the world's No. 1 automaker, has warned that sales comparisons with last year's strong numbers would look especially weak because of the success of last June's sweeping promotions.

GM had forecast its sales might fall more than 30 percent from a year earlier in June, dropping down to 2004 levels. Billionaire investor Kirk Kerkorian is looking to broker the alliance between GM, Nissan and Renault SA. Such a tie-up would create a global automotive powerhouse with almost twice the sales of Toyota, the No. 2 automaker in terms of worldwide sales.

Nissan's board has approved discussions about the alliance. Nissan Chief Executive Carlos Ghosn, who is credited with spearheading that company's revival beginning in 1999, also heads Renault, which has a controlling stake in Nissan.

Renault is no longer active in the U.S. vehicle market, although it has said it would like to return by 2010.

Ghosn has expressed an interest in Nissan-Renault acquiring a stake of up to 20 percent in GM, a move seen as increasing the pressure on current GM management and Chief Executive Rick Wagoner.

But Nissan has struggled in the U.S market this year, and its June sales tumbled by 19 percent.

Nissan's difficulties have included a disruptive move in its headquarters to Nashville, Tennessee, slower sales, production cuts and an embarrassing recall of some four-cylinder Altima and Sentra sedans due to evidence of engine fires.