Steve Quayle News Alerts

GM and Ford posted more sales declines in February and announced more production cuts, a double shot of bad news that will have a ripple effect on workers, parts suppliers and Metro Detroit's economy.

The slow start to 2005 is a setback for the two largest U.S. automakers, which had predicted product-led comebacks this year after recently losing market share to foreign manufacturers.The losses at General Motors Corp. and Ford Motor Co. in February overwhelmed gains by many foreign manufacturers, pushing overall industry down 2 percent.

GM said vehicle sales dropped 12.7 percent in February, and Ford reported a 3 percent decline. Once again, DaimlerChrysler AG's Chrysler Group was performed best among the Big Three, reporting a 7.5 percent increase in February, lifted by new models such as the Chrysler 300 sedan.

The production cuts likely will dent Ford and GM's profits and force them to idle workers. Suppliers who depend on business from GM and Ford also will take a hit.

Southfield-based auto interiors supplier Lear Corp. on Tuesday lowered its earnings forecast for the first quarter on news of the production cuts.

Separately, GM announced Tuesday that it was closing its Lansing Car Assembly, temporarily idling 3,200 workers.

The news underscores the deep-seeded problems that have left Michigan with the nation's highest unemployment, huge budget deficits and dwindling manufacturing jobs.

While overall sales fell, Ford and GM touted improved numbers for important new vehicles, including the Pontiac G6 and Ford Five Hundred sedan.

Yet most Asian automakers did better, with Toyota Motor Co.p. and Nissan Motor Co. posting big gains and Hyundai Motor Co. making inroads.

Asian automakers increased U.S. market share by 4 percentage points to 36.1 percent, while domestic automakers lost ground, reporting a 5 percentage-point drop to 57.9 percent.

The numbers underscore the challenge the Big Three face in winning back customers and suggests that even with a raft of new cars and trucks this year, a quick rebound is unlikely.

February is typically a weaker month for auto sales. But last month was hit particularly hard hit by bad winter weather and weaker demand following a blockbuster December 2004, which may have kept customers out of the market.

February's overall drop in auto sales put the industry on track to sell 16.3 million units in 2005, down from last year's 16.9 million. But February is not the best yardstick for judging how the year is going to come out, said Jim Sourges, an automotive analyst with Capgemini in Detroit. And this February is no different. "By no means is it doom and gloom," he said.

Still, the results were disappointing for GM and Ford, which have watched sales plummet in recent months, despite new model introductions.

GM was pulled down in February by an 8.5 percent drop in demand for its trucks and SUVs and a 17 percent freefall on the car side, even with sales at record levels for the new Pontiac G6, Buick LaCrosse sedans and Chevrolet Cobalt compact car.

"We're seeing some positive momentum for our new products," said Paul Ballew, GM's chief sales analyst. But he acknowledged that February sales were "disappointing and below our expectations."

Weaker sales and a surplus of new vehicles led GM to expand already-announced production cuts for the first three months of this year -- from 9 percent to 12 percent -- as compared with the first quarter of last year. As expected, the company also said Tuesday it would cut factory output by about 10 percent during the April-May-June period.

The announcement mirrored news at Ford, which also said Tuesday it would increase production cuts during the first quarter and lower factory output during the second quarter, mostly on the truck side.

In February, the automaker posted an 8 percent increase in car sales on the back of the new Ford Five Hundred sedan, the redesigned Mustang sports car and the Focus compact, which found many takers with a Dell computer giveaway promotion. But truck sales declined 8 percent, as demand fell sharply for large truck-based SUVs like the Explorer and Expedition.

The decline is part of a general softening in demand for large SUVs, many of which are overdue for updates and get poor gas mileage, said Pete Langlois, automotive analyst with Ernst & Young.

"On the large truck side, we're seeing what would appear to be some fatigue," he said.

Ford's Pipas said large SUV sales began to decline in 2000 and will likely fall more by the end of the decade as consumer tastes turn toward smaller SUVs and car-based crossover vehicles.

"Sport utility vehicles will continue to be among the best-performing segments. But there is this shift, which you would expect to see as the segment matures and evolves, and as consumer needs change and their lifestyles and life stages change."

Chrysler posted its 11th consecutive month of year-over-year sales gains in February, lifted mainly by a 36 percent jump in sales of its Chrysler brand. Gary Dilts, Chrysler's senior vice president of sales, said bad weather during the month may have kept consumers out of the market, but was pleased the industry didn't fare worse. "Frankly, it turned out a little better than where we thought it would be."

Yet the month turned out to be far from disappointing for several foreign automakers. Toyota reported its best-ever February with an 11.1 percent gain over the previous year.

South Korea's Hyundai Motor Co. also turned in a record February, with a 19 percent jump over last year, while Nissan was up 10.1 percent. Subaru turned in its best month since 1986, climbing 7.2 percent, and Mazda gained 2 percent.

But Honda fell 7.2 percent as sales of its passenger cars plummeted.

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