GM, Ford to Cut 3rd-Quarter Output

General Motors Corp. and Ford Motor Co. said Tuesday that they will cut third-quarter production after heavy incentives failed to give much of a boost to U.S. vehicle sales in May.

And DaimlerChrysler said it sees its Chrysler unit posting an operating loss of $1.17 billion in the second quarter, partly due to higher incentive costs and lower revenue.

With most leading automakers reporting results by late Tuesday, May U.S. sales came in at a seasonally adjusted annual rate of about 16.1 million vehicles.

That is above a rate of 15.7 million in May last year, and marks the first gain over year-earlier levels so far in 2003. But it also is below April’s pace of 16.4 million, and comes against the backdrop of bloated car and light-truck inventories.

Although production cuts in the third quarter were expected, the fear is that more rollbacks could follow if June and July sales are weak.

Ford’s May sales fell 5.8% from a year earlier. Signaling more weakness in the months ahead, the world’s second-largest automaker said it was cutting its projected third-quarter North American vehicle production by nearly 15%.

The lower production, which has a direct effect on earnings since automakers count vehicles as sold when they are shipped from assembly plants, followed a similar cut in Ford’s second-quarter output.

General Motors said its May sales rose 4% over the same month last year for its first monthly sales gain so far this year.

But the No. 1 automaker worldwide, which said it cut its second-quarter North American production by almost 12%, said it plans to scale back third-quarter output by 6%.

Shares of Ford fell 38 cents, or 3.43%, to $10.69. GM, which weighs heavily on the Big Board, declined 39 cents, or 1.07%, to end at $35.95. DaimlerChrysler fell 11 cents to $31.65. All trade on the New York Stock Exchange.

Since April, Detroit’s Big Three automakers have ratcheted up incentive offers that already were averaging more than $3,000 per vehicle.

And General Motors unveiled an aggressive new incentives program Tuesday, a day after the Chrysler side of DaimlerChrysler, which saw its May U.S. sales fall 3%, rolled out its new sales program.

“We are in the midst of an extreme incentive war,” said Gary Dilts, Chrysler’s senior vice president for sales.

However, automakers have acknowledged that interest-free loans and other incentives are failing to attract as many consumers as in months past, and production cuts were widely anticipated.

Credit-rating agency Standard & Poor’s late Tuesday revised its outlook for DaimlerChrysler’s roughly $73.3 billion of debt to “negative” from “stable,” citing Chrysler’s “staggering” expected second-quarter loss.

Among foreign automakers, many of which continue to carve out higher U.S. market share, Nissan Motor Co. said its U.S. sales were up nearly 7% and Toyota Motor Corp. said its May sales rose 6.1%.

The biggest gainer, Honda Motor Co., said its U.S. sales jumped 18% to achieve the second-highest sales month in the company’s history.