Wednesday, June 4, 2003

Pickups, SUVs drive U.S. vehicle sales in May

By John Porretto
The Associated Press

Sales of pickups and sport utility vehicles helped Detroit's Big Three automakers post slightly better-than-expected sales in May, but Ford Motor Co. and DaimlerChrysler AG's Chrysler Group still were down for the month.

Tepid sales since the first of the year also prompted Ford and rival General Motors Corp. to announce profit-curtailing production cuts for the third quarter, and DaimlerChrysler warned of a likely second-quarter operating loss for Chrysler.

Among foreign automakers, American Honda Motor Co., Hyundai Motor America, Nissan North America and Toyota Motor Sales USA all notched sales gains in May. Toyota had its best month in 46 years of business in the United States.

"Emerging signs of a strengthening economy, a much-anticipated tax break and a stock market showing hints of a comeback combined to fuel sales," Jim Press, Toyota Motor Sales' executive vice president and chief operating officer, said.

Most analysts expect foreign automakers to continue gaining share this year from the Big Three as the transplants add new vehicles and production capacity in North America. Nissan opened the latest plant last week in Mississippi.

GM, the world's largest automaker, recorded a 13.3 percent rise in light truck sales, which include pickups, SUVs and vans, while car sales were off 7.4 percent. The net result: a 4 percent increase from a year ago, GM's first monthly sales gain this year.

Ford's light truck sales rose 1.8 percent last month, but total volume for Ford, Lincoln and Mercury brands fell 5.8 percent because of an 18.4 percent decline in car sales.

Chrysler's results were more balanced, but negative nonetheless: car sales down 5 percent, truck sales off 2.7 percent. Total volume fell 3.3 percent.

David Healy, an analyst with Burnham Securities, said a last-minute flurry of sales in May helped offset what was shaping up to be a sour month.

"The industry fared slightly better than I expected, but it's nothing to write home about," Healy said.

Despite heavy incentives in April that lured consumers, Ford, GM and Chrysler all saw sales decline compared with a robust month a year ago. All three poured on the deals again in May, and GM announced its latest offerings Tuesday, including rebates of up to $4,000 on some 2003 models. GM also extended interest-free financing on most models through July 7.

GM's total truck sales last month topped 258,000, an industry record for May. Midsize SUV sales were up 36 percent, driven by the GMC Envoy (up 83 percent) and Chevy TrailBlazer (up 59 percent).

At Ford, the No. 2 automaker behind GM, the new Ford Expedition and Lincoln Navigator paced the company to a new SUV sales record for May.

"Although the U.S. economy is still in a period of slow growth, we believe the tax cut package and higher consumer spending will help to accelerate economic growth before the year is over," said Jim O'Connor, Ford's group vice president for North American marketing, sales and service.

Yet Ford said it would reduce production for the July-September period by 15 percent. GM plans to scale back production for the same period by 6 percent.

A production cut is significant because automakers consider a vehicle sold when it's shipped from the manufacturing plant to a dealer, not when the dealer reaches an agreement with a buyer. As such, diminishing production can reduce the automaker's bottom line.

At Chrysler, the Dodge Ram set a sales record for May. But parent DaimlerChrysler said Chrysler was likely to lose 1 billion euros ($1.17 billion) in the second quarter in part because of lower revenue and higher incentive expenses.

"We're in the midst of an extreme incentive war," said Gary Dilts, Chrysler's senior vice president for sales.

The news was much better at Honda and Toyota, Japan's two-largest automakers. American Honda had its best-ever May with sales of 130,454 vehicles. Toyota set all-time sales records in five categories last month.

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