August Sales Run Slower at GM

September 1, 2005

Katrina Shatters Auto World, Too by Mike Davis (9/5/2005)
Automotive losses underscore the human ones.


Asian carmakers continued to post big sales gains in August as the employee discounts for all from domestic manufacturers began running out of steam. Overall, the sales were essentially flat, hovering at around an annualized rate of 17.2 million units.

After two strong months in June and July, General Motors’ sales dropped 16 percent in August while Ford Motor Co. and Chrysler reported small sales increases in the face of the usual competition from Asian rivals.

Toyota, Honda, Nissan, and Hyundai all reported strong sales during August, while Suzuki posted its best August sales numbers since 1989.

Honda led the way with a 19.5-percent sales increase as its stepped up promotional activity for the end of the 2005 model year. Nissan also posted a double-digit sales increase and Toyota set a sales record during August, the company reported.

“Even as the impact of employee pricing wanes and pump prices climb, the industry presses ahead on the strength of new products and hybrid technology,” said Jim Press, Toyota Motor Sales chief operating officer.

Automakers also said they expected auto sales to drop this month and through the autumn as demand levels off in the wake of the big summer sell-off sparked by the employee-discounts promotions.

Katrina an unknown

It’s also difficult to predict the short- and long-term economic consequences of Hurricane Katrina, automakers said.

Paul Ballew, GM’s executive director of global market and industry analysis, said if the storm-related surge in pump prices for gasoline eases in a week or two, the impact on the general economy will be modest.

“This is not an oil shock like the oil shock in prior times,” Ballew said. The U.S. economy is in good shape and appears very resilient, he added.

Ballew, however, admitted GM’s sales were disappointing. “We were down a little bit from where we expected to be and the industry was a little softer than we expected it to be,” he noted. Ballew estimated that the Katrina may have reduced total sales by 400,000 units.

Overall, the success of the employee-discount program during June and July had reduced inventories of unsold vehicles and increased sales.

Gary Dilts, Chrysler Group, senior vice president - sales, said the flurry of end-of-the month sales that have been one element of the business for the past couple of years didn’t materialize last month. Part of the reason was the hurricane, which had a big impact on all kinds of businesses, he said.

“The devastation brought by Hurricane Katrina had some impact on our sales during the final stretch of August,” said Dilts, who noted that Chrysler’s sales had increased one percent with cars up five percent and trucks down one percent.

Ford posted a modest six-percent sales increase and noted the company was beginning to see a definite trend away from traditional SUVs and towards cars. Ford’s cars sales jumped 22 percent, paced by the deliveries of the new Mustang, Ford Five Hundred, and Mercury Montego, as well as the Ford Focus.

“In 2005, new products have helped us achieve significant inroads among car buyers and in the growing crossover utility market,” said Steve Lyons, Ford group vice president North America Marketing, Sales and Service. “These segments likely will continue to attract buyers in an environment where gasoline prices are rising. We’re optimistic we can achieve further gains with the introduction of three all-new mid-size cars — the Ford Fusion, Mercury Milan, and Lincoln Zephyr — and the Mercury Mariner hybrid utility vehicle,” he added.

“There’s no question that demand for traditional sport-utility vehicles has been affected by rising gas prices as well as significant changes in buyer demographics and product offerings,” said Lyons. Overall, sales of traditional sport-utility vehicles declined 33 percent in August.

In response to GM’s extension of its employee discount programs, Ford extended its own similar plan until Sept. 30.

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