General Motors and Ford are expected to announce further cuts in vehicle production levels this week as they move to trim inventories of unsold cars and trucks following weak sales, analysts told the Reuters news agency.
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GM and Ford are expected to cut North American production by about 6 percent for the first quarter of 2005, Ron Tadross, an analyst with Banc of America Securities, told Reuters.
GM and Ford both cut fourth-quarter production but vehicle inventories remain high, the news agency noted.
Reuters said automakers are scheduled to report November US vehicle sales on Wednesday, when GM and Ford are also expected to release their forecasts for first-quarter vehicle production. Production levels affect the bottom line because automakers account for earnings from vehicles when they are produced rather than when they are sold from dealer lots.
GM, in particular, has tried to cut inventories with a new round of incentives, including its “Lock and Roll” offer announced November 10, which allows consumers to lock in a finance rate on both a new model bought in November and another GM car or truck bought years later, Reuters said.
But analysts reportedly said the programme failed to boost GM’s sales as much as past incentive offers.
“This programme was conceived to drive showroom traffic and to move leftover 2004 units, but we don’t think it’s been very effective,” Merrill Lynch analyst John Casesa said in a research note cited by Reuters.
Automakers are beginning to shy away from raising incentives further, believing it is less costly to cut production, David Healy, an analyst with Burnham Securities, told the news agency.
According to Reuters, GM expects industry sales in November to be flat or slightly stronger compared with last November’s seasonally adjusted annual rate of 16.9 million.
But other analysts reportedly are more pessimistic, with estimates ranging from an annual rate of 16.3 million to 16.6 million. GM’s sales are expected to drop about 6 percent from strong year-earlier levels, they said.
Several analysts told Reuters they expect Ford sales to drop slightly, falling for the sixth month in a row. But Healy reportedly said Ford sales could climb about 3%, helped by new models such as the Five Hundred sedan and the Freestyle crossover wagon.
Reuters said the Ford brand and GM’s Chevrolet brand are locked in a tight battle for the title as the top-selling US brand. For the first 10 months of this year, Ford led Chevrolet by 20,751 vehicles.
Sales for the Chrysler group are seen climbing slightly, boosted by its hot-selling Chrysler 300 sedan, Reuters noted.
Analysts told the news agency that foreign automakers, particularly Toyota and Nissan, will post another strong sales month and continue to take US market share from both their larger US competitors and smaller Asian brands such as Mitsubishi Motors.
