GM, Ford Report Lower Sales in May
General Motors Corp. and Ford Motor Co. reported another month of lower U.S. vehicle sales Wednesday, and both lost more market share to Asian rivals amid slowing demand for fuel-thirsty sport utility vehicles.
The sales slump at GM and Ford, which prompted further production cuts, casts another shadow over Detroit’s struggling automakers as they grapple with competition and the effect of last month’s downgrades of their debt to “junk” status.
Both Ford and GM have been losing U.S. sales as Asian manufacturers, led by Toyota Motor Corp., report strong gains.
Toyota’s sales in May increased 7.8% and Nissan Motor Co.’s sales rose 15.5%, setting a new record for the month. Hyundai Motor Co.’s sales rose 8.5%.
By contrast, GM’s sales dropped 5.5%, while Ford’s were down 3%. It was the 12th straight month of declines for Ford and the fourth straight for GM, the world’s largest automaker. All sales figures are adjusted for two fewer selling days in May this year compared with May 2004 and exclude the automakers’ foreign brands.
Vehicle sales across the industry weakened to a seasonally adjusted annual rate of about 16.7 million in May. That was down from a rate of 17.4 million in April and 17.7 million in May 2004.
Because of weak sales, GM said its third-quarter North American vehicle production would be 9% lower than last year, and Ford said production in the period would be about 2% lower.
GM had already slashed its second-quarter production by 10%, while Ford cut its second-quarter output by 5%. Such cuts help reduce swollen inventories of unsold cars and trucks. But lower output also has a direct effect on earnings, because automakers book profit on vehicles when they are shipped from assembly plants, not when they are sold at dealerships.
Weaker U.S. sales were a driving force behind the $1.1-billion loss GM reported in the first quarter, its worst result since 1992. They also explain why Ford recently warned that its core automotive operations might not be profitable this year.
GM and Ford have relied on mid- and full-size SUVs as profit engines since the late 1990s. But those vehicles, especially from the aging lineups offered by GM and Ford, have become less attractive as gasoline prices hover at near-record highs.
“We have planned on cutting large [SUV] production fairly significantly in the third quarter,” said Paul Ballew, GM’s head of global market and industry analysis.
In a bid to boost sales and another sign of the difficulties they face, GM and Ford both said they would be offering steep new consumer incentives in June. GM has led the U.S. auto industry’s price war since the Sept. 11, 2001, terrorist attacks.
GM officials have said recently they hope to stop offering large incentives, which erode profit and can weaken the strength of vehicle brands. But GM’s sales have weakened considerably every time it has tried to wean itself off the discounts, undermining efforts to improve profitability.
DaimlerChrysler’s U.S.-based Chrysler division said its U.S. sales were up 5.6% in May. Honda Motor Co., long one of the fiercest rivals of the traditional Big Three U.S. automakers, said its sales fell 7.6%.
Reuters and Bloomberg News were used in compiling this report.
