Lower US vehicle sales for February at General Motors and Ford have forced them to cut production as they cede more market share to foreign rivals, Reuters reported.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
The news agency said GM and Ford, which started the year with swollen inventories of unsold cars and trucks, were both hurt in February by double-digit declines for many of their mid-and full-sized sport utility vehicles.
The segment has suffered from high US petrol prices as well as growing competition from car-based or crossover SUVs, analysts told Reuters.
GM, which was hurt by disappointing car sales as well as slower-than-expected turnover for its trucks, sold 309,375 new vehicles in February, down 13% over the same month a year ago, Reuters said, adding that the slump prompted it to cut planned North American production, already down about 9%, by another 3%. GM also reportedly said it planned to build 1.25 million vehicles in North America in the second quarter, down about 10% from output in the year-earlier period.
In line with its lower production plans, GM spokesman Stefan Weinmann told the news agency, the company told about 3,000 blue-collar workers at a car assembly plant in Lansing, Michigan, on Tuesday that the facility would soon be idled, putting them on an indefinite layoff.
“We said before that we would discontinue the facility,” Weinmann told Reuters – the Lansing car plant, set to be mothballed, builds the Pontiac Grand Am and an older version of the Chevrolet Malibu [badged as the Classic], vehicles that have long been known as permanent fixtures of GM’s low-margin fleet or daily rental vehicle line-up.
The report said lower 2005 output is almost certain to hurt GM’s financial results since automakers book profits on vehicles when they are shipped from factories and not when they are sold on dealership lots – production cuts also have a ripple effect across the automotive parts supplier industry.
Sales at Ford dropped 3%, Reuters said, noting that sales for its new car line-up were stronger than expected, but they failed to offset big declines in some bread-and-butter models. These reportedly included an 11% drop in sales of the key F-series pickup trucks and a 19% fall in sales of the Explorer SUV.
Ford, which posted its ninth consecutive drop in monthly US sales, told Reuters it was cutting first-quarter North American production by another 10,000 vehicles, or just under 1% – it also said it would produce about 940,000 cars and trucks in North America in the second quarter, down 1.2% from the second quarter last year.
According to Reuters, the production cuts came a day after Banc of America Securities analyst Ron Tadross cut his rating on GM and Ford shares to “sell,” citing continuing erosion in the automakers’ market position.
Tadross reportedly also warned things would get worse for the automakers if their credit ratings, currently hovering just one notch above “junk” status at Standard and Poor’s, are cut to non-investment grade.
“The share loss repercussions could be more widespread,” Tadross said in a note to clients cited by Reuters.
