Weak truck sales hurt GM
Wednesday, July 04, 2007
Weak truck sales hurt GM
Aggressive discounting boosts Asian carmakers
Christine Tierney / The Detroit News
General Motors Corp.'s sales plunged in June as demand for its small cars sagged and unusually aggressive discounting by Toyota Motor Corp. hurt its pickups.
Of the major automakers, GM suffered the biggest monthly decline, with sales down 21.3 percent in a market that was slightly weaker than the previous June.
Overall, car and truck sales fell 3 percent from year-earlier levels, and the drop would have been steeper if there hadn't been an additional selling day last month.
On a seasonally adjusted basis, the annual selling rate fell to a weak 15.6 million vehicles in June from 16.2 million a year earlier.
Ford Motor Co.'s sales were down 8.2 percent, for an eighth consecutive monthly decline, and DaimlerChrysler AG's sales slipped 1.8 percent. But Japan's leading automakers reported big gains.
"The industry is substantially below normal levels right now and below where we'd like it to be," said Paul Ballew, GM's director of industry analysis.
In addition, "we weren't anticipating that Toyota would go zero (percent interest) for 60 (months) on a brand new truck, and that has hurt our results," he said.
Toyota, flexing its financial muscle, offered big discounts on the Tundra to put the truck's launch back on track. Demand for Toyota's first full-size truck was running below the company's annual sales target of 200,000 units.
But last month, Tundra sales more than doubled to 21,727 after the Japanese automaker offered no-interest loans and other incentives amounting to $5,083 per pickup, according to auto data firm Edmunds.com.
"The only large truck with a higher level of incentives in June than the Tundra was the (Dodge) Ram," said Alex Rosten, manager of pricing and market analysis at Edmunds.com. "Everybody else was lower."
GM's truck sales fell 22.9 percent, reflecting big declines in its relatively new GMC Sierra and Chevrolet Silverado pickups, which carried incentives averaging less than $3,700 in June. Sales of the GMC Sierra pickup fell 26.5 percent, while sales of the Chevrolet Silverado declined by 23.5 percent.
GM is weighing its response. "If we have to make changes in our incentives play, we will," Ballew said. "We're certainly not going to cede ground in a category where we're best in class."
Asked about the incentives on the Tundra, Jim Lentz, executive vice president of Toyota Motor Sales USA, said: "Any time a manufacturer puts incentives (on a vehicle), it's probably deeper than they want to go."
However, "in a segment like full-size trucks, customers expect and in some cases need incentives to help them out of negative-equity positions," Lentz added. He was referring to trade-in vehicles worth less than the payments owed.
Fleet sale cuts hurt Big 3
The fierce competition in the truck segment illustrates the difficulty U.S. automakers face as they try to correct bad habits, such as excessive discounting, which weakened their brands and their financial results in the past.
In recent months, they have reined in low-margin sales to rental car companies that had boosted their volumes but undercut their profitability.
That was the main reason for a 24.7 percent drop in Ford's car sales in June, said Ford industry analyst George Pipas.
"That's where the decline in daily rental occurred," he said. "There are 20,000 Tauruses that got shaved off the year-to-year comparison."
He said Ford's share of the retail market -- sales to individuals through dealers -- was stabilizing this year at about 13 percent, at a level consistent with the targets set in Ford's recovery plan.
GM executives said they had anticipated a slowdown in June as the company scaled back its business with rental car companies.
"Our retail performance for the month was also below the solid running rate we've experienced for the first half of the year, which we attribute to a soft industry and lower incentive spending than our competitors," said Mark LaNeve, GM vice president for North American sales.
"However, we continue to believe that maintaining a disciplined approach to both incentives and daily car rental sales is key to making our marketing strategy work in the long run," he said.
Shift to cars aids Japanese
By contrast with its bigger Detroit rivals, Chrysler reported a 58.2 percent surge in car sales, reflecting big gains for the Chrysler Sebring and 300 sedans, while its light trucks volumes fell 14.9 percent. Chrysler's overall sales were down 1.4 percent. The U.S. market's shift away from trucks and toward more fuel-efficient cars helped Japan's leading automakers. Car sales accounted for 49.3 percent of light vehicle sales last month, up from 47.7 percent a year ago.
Honda Motor Co.'s sales rose 11.5 percent in June, and Nissan's jumped 22.7 percent, helped by strong sales of the Altima and Sentra cars.
Toyota's sales increased 10.2 percent to 245,739, putting it just 200 units behind Ford in June.
"What's most important is to make sure you don't put all your eggs in one basket, and make sure you have a balanced lineup," Toyota's Lentz said.
Toyota's Yaris, Camry and Prius gas-electric hybrid cars all recorded strong sales gains as gas prices averaged more than $3 a gallon.
Although the U.S. passenger car market held steady in June -- edging up 0.2 percent -- GM's car sales were down 20.1 percent. Analysts say some of GM's small cars are aging and others are not competitive. "It's a category where we haven't been doing as well as we should be," Ballew said.
You can reach Christine Tierney at (313) 222-1463 or ctierney@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
Weak truck sales hurt GM
Aggressive discounting boosts Asian carmakers
Christine Tierney / The Detroit News
General Motors Corp.'s sales plunged in June as demand for its small cars sagged and unusually aggressive discounting by Toyota Motor Corp. hurt its pickups.
Of the major automakers, GM suffered the biggest monthly decline, with sales down 21.3 percent in a market that was slightly weaker than the previous June.
Overall, car and truck sales fell 3 percent from year-earlier levels, and the drop would have been steeper if there hadn't been an additional selling day last month.
On a seasonally adjusted basis, the annual selling rate fell to a weak 15.6 million vehicles in June from 16.2 million a year earlier.
Ford Motor Co.'s sales were down 8.2 percent, for an eighth consecutive monthly decline, and DaimlerChrysler AG's sales slipped 1.8 percent. But Japan's leading automakers reported big gains.
"The industry is substantially below normal levels right now and below where we'd like it to be," said Paul Ballew, GM's director of industry analysis.
In addition, "we weren't anticipating that Toyota would go zero (percent interest) for 60 (months) on a brand new truck, and that has hurt our results," he said.
Toyota, flexing its financial muscle, offered big discounts on the Tundra to put the truck's launch back on track. Demand for Toyota's first full-size truck was running below the company's annual sales target of 200,000 units.
But last month, Tundra sales more than doubled to 21,727 after the Japanese automaker offered no-interest loans and other incentives amounting to $5,083 per pickup, according to auto data firm Edmunds.com.
"The only large truck with a higher level of incentives in June than the Tundra was the (Dodge) Ram," said Alex Rosten, manager of pricing and market analysis at Edmunds.com. "Everybody else was lower."
GM's truck sales fell 22.9 percent, reflecting big declines in its relatively new GMC Sierra and Chevrolet Silverado pickups, which carried incentives averaging less than $3,700 in June. Sales of the GMC Sierra pickup fell 26.5 percent, while sales of the Chevrolet Silverado declined by 23.5 percent.
GM is weighing its response. "If we have to make changes in our incentives play, we will," Ballew said. "We're certainly not going to cede ground in a category where we're best in class."
Asked about the incentives on the Tundra, Jim Lentz, executive vice president of Toyota Motor Sales USA, said: "Any time a manufacturer puts incentives (on a vehicle), it's probably deeper than they want to go."
However, "in a segment like full-size trucks, customers expect and in some cases need incentives to help them out of negative-equity positions," Lentz added. He was referring to trade-in vehicles worth less than the payments owed.
Fleet sale cuts hurt Big 3
The fierce competition in the truck segment illustrates the difficulty U.S. automakers face as they try to correct bad habits, such as excessive discounting, which weakened their brands and their financial results in the past.
In recent months, they have reined in low-margin sales to rental car companies that had boosted their volumes but undercut their profitability.
That was the main reason for a 24.7 percent drop in Ford's car sales in June, said Ford industry analyst George Pipas.
"That's where the decline in daily rental occurred," he said. "There are 20,000 Tauruses that got shaved off the year-to-year comparison."
He said Ford's share of the retail market -- sales to individuals through dealers -- was stabilizing this year at about 13 percent, at a level consistent with the targets set in Ford's recovery plan.
GM executives said they had anticipated a slowdown in June as the company scaled back its business with rental car companies.
"Our retail performance for the month was also below the solid running rate we've experienced for the first half of the year, which we attribute to a soft industry and lower incentive spending than our competitors," said Mark LaNeve, GM vice president for North American sales.
"However, we continue to believe that maintaining a disciplined approach to both incentives and daily car rental sales is key to making our marketing strategy work in the long run," he said.
Shift to cars aids Japanese
By contrast with its bigger Detroit rivals, Chrysler reported a 58.2 percent surge in car sales, reflecting big gains for the Chrysler Sebring and 300 sedans, while its light trucks volumes fell 14.9 percent. Chrysler's overall sales were down 1.4 percent. The U.S. market's shift away from trucks and toward more fuel-efficient cars helped Japan's leading automakers. Car sales accounted for 49.3 percent of light vehicle sales last month, up from 47.7 percent a year ago.
Honda Motor Co.'s sales rose 11.5 percent in June, and Nissan's jumped 22.7 percent, helped by strong sales of the Altima and Sentra cars.
Toyota's sales increased 10.2 percent to 245,739, putting it just 200 units behind Ford in June.
"What's most important is to make sure you don't put all your eggs in one basket, and make sure you have a balanced lineup," Toyota's Lentz said.
Toyota's Yaris, Camry and Prius gas-electric hybrid cars all recorded strong sales gains as gas prices averaged more than $3 a gallon.
Although the U.S. passenger car market held steady in June -- edging up 0.2 percent -- GM's car sales were down 20.1 percent. Analysts say some of GM's small cars are aging and others are not competitive. "It's a category where we haven't been doing as well as we should be," Ballew said.
You can reach Christine Tierney at (313) 222-1463 or ctierney@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
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