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Big 3 Auto Makers May Post Quarterly Losses

TIMES STAFF WRITER

All three U.S.-based auto makers appeared headed into the red for the fourth quarter as Ford Motor Co. reported Friday that it has slashed car and truck production for the second month in a row.

On the heels of a major cutback by General Motors Corp., No. 2 Ford said it is carving 135,000 cars and trucks out of its North American factory schedules for the rest of the year. Atop a 31,000-vehicle cutback the month before, that adds up to a 17% cut from Ford’s original production schedule for the quarter.

Like GM, Ford said it was responding to a sharp falloff in dealer orders for new cars and trucks, the result of a steep decline in consumer confidence since Iraq’s invasion of Kuwait on Aug. 2.

On Thursday, GM trimmed 111,000 vehicles from its fourth-quarter schedule--on top of a 182,000-vehicle cutback a few weeks earlier. For GM, that constituted a 19% cut from the initial quarterly production schedule.

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The cutbacks, which will shut down much of the domestic auto industry this month and temporarily lay off tens of thousands of workers, sent investment analysts back to the drawing board to further reduce financial forecasts.

GM’s loss for the quarter was put at up to $600 million, Ford was projected to lose more than $460 million, and Chrysler Corp., seen as hurting the least for the moment, would lose more than $15 million, according to various analysts.

The last time the Big Three auto companies fell into the red in the same quarter was in July-September, 1981, at the depth of the industry’s most severe economic trauma since the Great Depression. In that quarter, they lost a combined $943 million.

Joseph S. Phillippi, analyst at Shearson Lehman Bros. in New York, was cutting his earnings projections for the second time in 10 days. He said the production cuts have cleared away any doubts about the downturn facing the auto industry.

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Industry observers now agree that the seemingly healthy retail sales that have continued into November were inflated by sales to fleet customers and that underlying consumer demand has been weaker than total sales figures suggest.

Ford officials say they are reacting to a decline in orders from dealers, who have noted a falloff in customer traffic and are anticipating a collapse in sales to consumers.

The dealers, meanwhile, are having trouble getting financing from nervous lenders to buy the vehicles in the first place, said Phillippi. “The banks are really squeezing the dealers,” he said.

The pressure seemed to be having its effects in other ways.

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Chrysler announced Friday that as of January, it will no longer report its car and truck sales every 10 days, which has been the industry practice for decades. Chrysler said it will report its sales monthly and has sounded out Ford and GM about taking the same action.

Chrysler described it as part of ongoing cost-cutting and said the 10-day reports are meaningless anyway. But the U.S. companies have been miffed about statistical peculiarities in the 10-day sales reports that make it look as if Japanese companies are doing better than they are.

With Japanese production at plants in the United States still in its early stages, the Japanese companies are able to regularly report 50% and 100% sales gains by breaking out those vehicles from the sales of their cars produced overseas.

This masks the fact that their sales of imported cars, which still represent the bulk of sales by Japanese auto companies, are declining, Big Three officials complain. Reported just once a month, the decline in sales of imported vehicles tends to receive little press attention.

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The controversy has reached the highest levels. Bennett Bidwell, the vice chairman of Chrysler Motors, notified GM Chairman Robert C. Stempel and Ford Chairman Harold O. Poling by letter in early November of Chrysler’s departure from tradition.

A GM spokeswoman said the company is reviewing its own sales-reporting procedures, though not necessarily in response to Chrysler’s action. Ford sales analyst Joel Pitcoff said his company has “no plans to emulate Chrysler at this time.”


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