GM to Reduce Vehicle Production in North America

General Motors Corp. said Friday it plans to build 5.1% fewer cars and trucks in North America in the second quarter because of weak sales, raising concern it won’t meet earnings expectations.

GM said in its first estimate of April-to-June output that it will make 1,384,000 vehicles, compared with 1,459,000 in the year-earlier quarter. Truck production in the U.S., Canada and Mexico will rise 2.4% and car output will fall 11%.

Dealer lots are bulging with unsold vehicles as GM sales have fallen 6.6% in 1998. Cutting output eases the backlog but jeopardizes profit because auto makers record sales as cars leave the factory. GM will be hard-pressed to match second-quarter earnings estimates of $2.55 a share, analysts said.

“There’s no way they can earn near the consensus,” said Merrill Lynch analyst Nicholas Lobaccaro, who has a “neutral” rating on the stock. He lowered his full-year earnings estimate to $7.60 a share from $7.70 and said he might also cut his second-quarter estimate from $2.25.

The $2.55-a-share estimate is the average of 10 analysts surveyed by IBES International Inc. GM earned $2.21 a share in the year-earlier quarter and $7.82 a share for 1997. GM is expected to earn $8.05 this year, based on the average estimate.

GM’s car and truck inventory of 93 days at the end of February was highest among Detroit-based auto makers and well above the 60- to 65-day industry ideal. Its February sales, reported Wednesday, fell 7.1%, below expectations. Industry sales in the U.S. fell 0.7% in the month.

“GM’s numbers are downright awful,” said Salomon Smith Barney analyst Jack Kirnan, adding that February sales included declines in small cars, mid-size cars and full-size trucks.

GM also increased incentives on its minivans and several other models during the week. The auto maker added a $1,000 cash-back offer to its 1998 Chevrolet, Pontiac and Oldsmobile minivans and improved loan financing rates.

The company’s February U.S. market share fell to 28.6% from 30.5% in the year-earlier month. The auto maker said it left its first-quarter factory schedule unchanged at 1,388,000.

Also Friday, Ford Motor Co. said it was cutting North American production in its initial second-quarter forecast 4.8% from the year-earlier period to 1,176,000 cars and trucks.