Reuters is reporting Ford warns on U.S. industry sales, GM offers rebate.
U.S. auto industry sales have dropped far below expectations for April, a Ford Motor Co. executive said on Friday as rival General Motors Corp. rolled out an incentive program intended to boost crucial month-end sales.
“This month is terrible,” Ford chief sales analyst George Pipas said in an interview. “We are not even close to where we expected to be in April.”Pipas said the spillover from weaker housing to other areas of the economy and rising gas prices appear to be affecting consumers but added that many of these same factors were also present in March. “I have a hard time explaining why April is so weak,” he said.
Ford and other automakers will report April U.S. sales on May 1. For the first three months of the year, U.S. industry-wide auto sales were down 1.2 percent. Earlier this week, General Motors Corp. Vice Chairman Bob Lutz said the crisis in the U.S. mortgage market has hurt U.S. auto sales this month.
Lutz said he did not know how GM’s sales performed in April, but he expected the whole automotive sector would feel the impact of the stress on the mortgage market.
GM is offering lower-interest financing to customers with weaker credit ratings through this weekend in an effort to boost sales for April, sources familiar with the sales plan said on Friday. GM will offer reduced interest rates to customers whose credit is assessed at two of its lower rating levels on all brands except Saab, the sources said.
Detroit automakers had forecast a flat to slightly weaker vehicle market going into 2007 before the pressure intensified on subprime lenders, who have poor credit histories.
Pipas’s comments followed cautionary remarks from auto dealers on the expected impact from the slowing housing market.
Weak housing starts have also weighed on sales of high-margin pickup trucks, often bought by construction workers. Ford is in the middle of a sweeping restructuring that involves closing 16 plants and cutting about 45,000 jobs.
Ford’s U.S. sales were down 13 percent in the first quarter and GM’s sales were down 5.5 percent, while Toyota sales rose 11 percent.
Pippas may have a hard time explaining weak sales but the better question is how did they hold up as long as they did? The answer can likely be found in the negative savings rate, and Mortgage Equity Withdrawal. The latter is drying up quickly as a source of consumer funds.
The striking point in the article is that smack in the face of a subprime lending fiasco, GM is desperate enough to boost sales by lowering finance charges to customers with weak credit ratings. This is as foolish as it is desperate.
In a pinch, big ticket items like cars are easier to cut back on than necessities like gasoline. But pressure is mounting in other places, even insurance.
Thousands of drivers scrimp on insurance
The Detroit News is reporting More drop collision and theft coverage as economy takes toll.
Hundreds of thousands of motorists in financially beleaguered Michigan have downgraded their auto insurance — a money-saving gamble that could leave them without a ride if their vehicle is stolen or smacked by another car.
The latest available data shows that nearly 300,000 comprehensive policies were dropped from 2000 to 2004 — a trend that has continued, some large insurers say. Comprehensive covers vehicle theft — Detroit has nearly 100 reports a day — and deer-vehicle accidents, a growing suburban problem.
Another 28,500 got rid of their collision policy, which covers damage from another vehicle, while many more are reducing coverage or raising deductibles to save money, agents say.
People face tough choices
In a state with the nation’s second-highest unemployment rate — 6.5 percent — and sky-high auto insurance costs, some people are left choosing between keeping the electricity on and paying for full coverage, said St. Clair Lake, an Allstate agent in Detroit.
One reason for the soaring prices is the high rate of vehicle thefts in Detroit — the city ranked 16th nationally in 2006 with 35,106, according to the National Insurance Crime Bureau. But the main factor is the cost of the state’s “no-fault” insurance structure, officials said.
GM loses lead to Toyota
The Detroit News is reporting GM boss vows fight for sales
General Motors Chairman and CEO Rick Wagoner told senior executives the company hasn’t given up the fight despite being outpaced by Toyota in global sales in the first quarter of the year.
“We still have the majority of the year in front of us, and we will fight hard for every sale — all the while staying focused on our long-term goals as a global, growing company,” he told high-level company officials in an e-mail Tuesday shortly after Toyota’s sales numbers were released.
Wagoner said GM was surpassed by Toyota largely because of its move to reduce unprofitable sales to fleet customers and the fact that Toyota crushes GM in sales in Japan.
GM Vice Chairman Bob Lutz offered a curt response to Toyota’s outpacing GM in the first three months of the year: “My reaction is ‘So what?’ “
He also noted that GM is “staying focused on further reducing our still huge health care cost disadvantage versus Toyota and other non-U.S. based manufacturers.”
At the same time, an issue domestic automakers have been complaining loudly about is the value of the Japanese yen.
Automakers argue Japanese currency “manipulation” unfairly gives Toyota, Honda and Nissan up to a $4,000 per vehicle subsidy, by making American cars more expensive in Japan and Japanese imports less expensive here. Japan and Japanese automakers reject the charge.
Two-thirds of the U.S. $88 billion trade deficit with Japan is auto-related.
Japan subsidy edge touted
Last month, U.S. Sen. Debbie Stabenow, D-Lansing, introduced a bill dubbed the Japanese Currency Manipulation Act, which would force Japan’s government “to take action to stop subsidizing millions of auto exports to the U.S. by bringing its currency into proper alignment with the U.S. dollar,” said a statement from the Automotive Trade Policy Council, a group representing GM, Ford and DaimlerChrysler AG.
I am puzzled by the huge difference in reactions between Wagoner’s vowing “to fight for every sale” while Lutz is saying “So What?” OK guys, which is it and why the interest rate rebates to subprime borrowers? Something tells me this is not just an April thing.
As for currency manipulation, if the US is allowed to debase it’s currency the way we do, do we have a legitimate beef about what any other country is doing with their currency or why? It will be interesting to see if any of the misguided tariff efforts against Japan or China gather any steam.
Ford feels heat to refresh lineup
To survive in today’s auto industry, you need a steady parade of fresh designs to keep consumers interested.
Ford Motor Co. learned that the hard way by allowing initially successful models like the Taurus and Ranger to languish too long without a significant refresh.
Today, it has the oldest lineup of any major automaker.
Ford is trying to change that. By 2010, it expects to have one of the freshest vehicle lineups. But after losing $12.7 billion last year and borrowing against nearly all of its assets to finance the turnaround plan, the question is whether Ford can survive long enough to see the product renaissance.
New models like the Fusion sedan and Edge crossover are not only selling well, but also bringing in new buyers to Ford.
But its aging vehicles like the Explorer SUV and the Focus sedan are losing sales and driving consumers to competing brands in alarming numbers.
According to J.D. Power, 58.5 percent of those who bought a Ford already owned a Ford, while only 42 percent of those who traded in a Ford bought another Ford.
That means most people buying Fords are already Ford customers, but nearly half of those trading in Fords are defecting to other brands.
The problem is shared by Ford’s Detroit-based rivals, but the gap is greatest at Ford.
The reverse, however, is true for Toyota Motor Corp. Only 35.8 percent of Toyota buyers in the first quarter were return Toyota customers, yet 58.5 percent of those who traded in Toyotas bought another one.
Union Strife at GM
Reuters is reporting GM cuts work at 2 plants after talks fail.
Friday April 27, 2:48 am ET
General Motors suspended development work at two U.S. plants after talks between the union and management on cost cutting ended, the Wall Street Journal reported on its Web site on Friday.
United Auto Workers leaders ended talks at facilities in Fairfax, Kansas and Lordstown, Ohio after disagreements with the company, the Journal reported, citing unnamed sources.
The paper cited sources as saying GM told UAW that it was suspending work related to two new-vehicle programs.
UAW and GM could not immediately be reached for comment.
US Outlook is Poor
- The economy is dramatically slowing (GDP came in at 1.3%)
- Auto sales are falling
- Ford’s lineup is aging
- GM is arguing with the union over cost cutting
- MEW is falling along with falling home prices
- GM is showing signs of desperation by appealing to subprime borrowers
Mike Shedlock / Mish/