Dec. 2, 2004
Detroit News
General Motors Corp. and Ford Motor Co. posted sharp sales declines in November and announced first quarter 2005 production cuts as the Big Three's combined market share fell to an all-time low of 56.6 percent.
Overall U.S. auto sales fell 4.9 percent in November compared to a year ago, mostly because of GM's 16.5 percent decline and Ford's 8.1 percent slump, according to Autodata Corp.
GM, which once sold more than half of all U.S. cars and trucks, saw its market share slide to 24.8 percent in November; it's only fallen lower during a labor strike. For the year, GM's market share has fallen to 27.3 percent from 27.7 percent a year ago.
"You can't make a silk purse out of that sow's ear," said GM Chairman Rick Wagoner. "Clearly we need to pick up the pace."
The dismal results mark a significant step backward for the world's two largest automakers. They were counting on new vehicles and rich incentives to produce better sales. And the production cuts in the first quarter are likely to put a dent in their earnings.
Asian brands, meanwhile, continued to make significant inroads, with Toyota Motor Co.p. gaining 4.4 percent and Nissan Motor Co. surging 25.7 percent. Both posted record November sales.
"It's so redundant to say it, but it's all about product," said Rebecca Lindland of Global Insight in Lexington, Mass., adding that GM and Ford can no longer entice buyers with deals alone. "Consumers are immune to incentives."
DaimlerChrysler AG's Chrysler Group was the only Detroit automaker to increase sales last month, posting a 4.5 percent gain. Chrysler remains on pace to grow its U.S. market share for the first time since 1998,
The poor showings by GM and Ford undercut each automaker's efforts to stave off market share losses this year.
Though incentives have helped the automakers maintain sales volumes and keep factories humming in recent years, the announcements Wednesday of new production cuts reveal the strategy could be losing sway in the marketplace.
GM, the world's largest automaker, said it would cut vehicle production 7.1 percent to 1.25 million vehicles during the first quarter of 2005, while Ford announced it would trim first quarter production 8 percent to 930,000 vehicles. Both automakers had already announced production cuts for the fourth quarter of this year.
GM sales slipped last month, despite strong contributions from new models such as the Chevrolet Malibu sedan, Corvette sports car and GMC Canyon pickup. The company was pulled down by major declines from its Saturn, Buick and Saab divisions and benefited only slightly from its "Lock n' Roll" promotion during the month, which allowed customers to lock in an interest rate on two GM vehicle purchases during the next 10 years.
In a Wednesday conference call with analysts and the media, GM's top sales analysts Paul Ballew said only five percent of customers during the month signed up for the program.
The poor results hurt GM's chances of reversing a market share drop in 2004. This year, GM claimed 27.3 percent of the U.S. market, down 0.8 percent from last year.
"We're not giving up on the year," said Paul Ballew, GM's chief sales analyst on Wednesday. But "it will be difficult for us to hold share this year."
GM's 24.8 percent market share in November was perhaps the most alarming sign from Wednesday's sales results. The figure represents a huge drop for GM, which controlled more than 50 percent of the U.S. auto market in the 1960s and was once targeted by the government as a trust that needed to be broken up so other companies could better compete.
Even though the auto market is much more crowded today than it was 40 years ago, GM should still be in a better position than it found itself at the end of November, said Joseph Barker, an auto analyst at CSM Worldwide in Farmington Hills.
"On the surface, 25 percent is certainly not a healthy number for General Motors," he said.
Ford is also fighting off a market share decline this year, and was not helped in November.
The Dearborn automaker said sales of its new Mustang were up 12 percent compared to a year ago.
"Normally, we have to wait until spring to see Mustang sales at this level," said Jim O'Connor, Ford's group vice president for North American marketing, sales and service.
The gains, however, weren't enough to offset declines by carry-over models such as the Ford Focus compact car, which dropped 40 percent in November.
Production cuts in the first quarter of 2005 mostly reflect the impact of an eliminated shift at the company's St. Louis Assembly Plant and closure of the Edison Assembly Plant, said George Pipas, Ford's chief sales analyst. The cuts were also designed to help better manage inventories, he said.
Meanwhile, Chrysler had another good month in November, posting its eighth consecutive month of year-over-year sales gains.
The Auburn Hills automaker got a boost from its Chrysler brand, which saw sales surge 49 percent during the month, thanks in part to Motor Trend magazine's naming of the new 300 as its car of the year.
"From a product standpoint, Chrysler has the momentum," said Michael Ward, auto analyst at CreditSights Inc.
The company's Dodge brand also increased sales, while its Jeep brand saw sales drop sharply by 24 percent as older models languished on dealer lots and a redesigned Grand Cherokee was still arriving in showrooms.
While Chrysler gained market share in November, declines at GM and Ford reduced the Big Three's overall piece of the U.S. auto market. Domestic automakers ended the month with 56.6 percent of the market, down 2.9 percentage points from a year ago. In 1995, the Big Three sold more than 73 percent of all cars and trucks in United States.
November is traditionally a slow month for U.S. vehicle sales as consumers turn their attention to Christmas shopping or wait for year-end deals in December. .
Led by gains at Toyota Motor Corp, Nissan Motor Co. and Kia Motors, Asians grew their combined U.S. share 5.4 percent last month and ended the month with 35.8 percent of the market.
Bloomberg News contributed to this report. You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
http://www.detnews.com/2004/autosinsider/0412/02/A01-22222.htm