GM Down Sharply as War with Iraq Breaks Rebate Fever

March 3, 2003
by Joseph Szczesny

Car sales dropped 7 percent in February as the annualized rate of sales of new vehicles fell to 15.5 million units under the combined weight of bad weather, economic jitters brought on the tensions over war in the Middle East, and rising oil prices.

Automakers tried to minimize what was the second consecutive decline in monthly sales.

February sales also produced the first signs that the demand for big sport-utility vehicles may have peaked. GM reported a steep decline in the sales of the Chevy Suburban, Cadillac Escalade, and Chevy Tahoe; all fell between 25 and 34 percent last month. In addition, sales of the Chevrolet TrailBlazer dropped 14 percent. Sales of Ford's Expedition dropped from the second straight month and sales of the Ford Explorer dropped 7 percent, while sales of the Grand Cherokee fell 20 percent and sales of the Toyota Sequoia fell 17 percent.

Sales of smaller car-based SUVs and minivans, however, did well last month as gasoline prices climbed and the campaign equating driving a big SUV with support for terrorists began to bite. Ford’s Escape jumped 28 percent and sales of the vehicles such as the Buick Rendezvous, Saturn VUE, Honda Pilot and Acura MDX all increased last month. In addition, Toyota also reported a 58-percent increase in sales of the Corolla compact even though the company’s total sales dropped 1.1 percent.

Reading the tea at GM

Automakers insisted it was unwise to read too much into the sales totals from just one month. Nonetheless, after reporting the 19-percent drop in sales last month, GM also announced it was taking preliminary steps to reduce production in the second quarter, while Ford officials they had decided to postpone announcing production targets for the second quarter.

Paul Ballew, GM's general director of market analysis, brushed aside suggestions the production cuts meant GM was calling off its hunt for additional market share. "We're not planning to lose share. We're still going to set the terms. But we believe the competition is very stiff," Ballew said during a conference call with analysts. “February was a challenging month for the industry, with poor weather in most of the country and significant uncertainty impacting consumers and the overall economy,” said John Smith, group vice president of North America vehicle sales, service and marketing.

“At GM, we had a tough comparison to our performance last February, which included record truck sales and a total share of nearly 31 percent. Yet, we’re pleased with gains in our retail share compared to January, and all of 2002, and the prospects of further increases that will result from the 16 new GM products being introduced this year.”

Walter McManus, executive director of global forecasting for J.D. Power & Associates, said GM was clearly still paying for the big year-end push in December that boosted the company’s market share. The effort paid off but it clearly pulled ahead sales, he said.

Ford, Chrysler cheer

Ford and Chrysler, which had taken a beating as GM ramped up incentives, both snatched back market share from GM last month. Ford estimated it gained more than a full point as its sales increased 1.9 percent. “February was a challenging month,” said Jim O’Connor, Ford Group Vice President, North America Marketing, Sales and Service. "Considering all that, our sales were pretty good and our market share was higher for the second month in a row.” George Pipas, Ford sales analyst, said Ford sales increased 1.9 percent and the company picked up market share last month on the strength of strong fleet sales. “February was not a normal month,” added Pipas, who said that on an annualized basis sales dropped to roughly a 15.5-million unit rate.

The Chrysler Group reported its sales dropped 4 percent in February but the automaker managed to pick up an additional half-point of market share, according to Gary Dilts, Chrysler Group Senior Vice President - Sales. Dilts added Chrysler believed February’s showing has left Chrysler in a position to capitalize on any surge in buyer interest during the upcoming spring selling season. “We plan to continue to build on the strength of our ’Best Values in America’ sales campaign because it provides a point of clarity for consumers,” added Dilts. Chrysler's German partner, Mercedes-Benz, also reported an 8-percent increase in sales.

Mitsubishi, however, reported its sales dropped 20 percent and Porsche sales fell 38 percent, while Suzuki reported a 12-percent increase in sales. Hyundai sales reported its sales were flat, while its partner Kia reported a 6-percent increase. Suzuki, Mazda and Subaru also reported sales increases.

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