Soft sales may hurt Big 3

By From detnews| Apr 25 2007
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Soft auto sales in April could spell trouble down the road for Detroit's three automakers as they restructure and try to entice buyers away from strong foreign brands, according to several industry analysts.

Five industry analysts predicted that U.S. sales will be down in April compared with the same month in 2006, and in a down market that continues to shift from trucks to cars, that means trouble for Detroit.

The analysts said there doesn't seem to be any pent-up demand for vehicles. Consumers either have too much debt, are facing increased payments due to rising adjustable rate mortgages or are waiting to see what happens to gasoline prices.

Under those circumstances, it will be difficult for the Big Three to execute their turnaround plans because they're competing for a shrinking market mainly against Honda Motor Co. and Toyota Motor Corp., which both have strong car brands.

"It's a very tough environment out there right now," said Joe Barker, senior manager of global sales analysis for CSM Worldwide, an automotive forecasting firm in Northville.

"If you're undergoing a restructuring at the same time that you're trying to go after a smaller pool of consumers, it just adds to the complexity of a turnaround plan."

Ford Motor Co., General Motors Corp. and DaimlerChrysler AG's Chrysler Group are all at varying stages of turnarounds. All have lost billions in recent years as Toyota and Honda have increased their market share.

GM actually made money in the fourth quarter of 2006 and by most accounts is ahead of its U.S.-based counterparts in restructuring.

He predicted April sales at an annualized rate of about 16 million vehicles. U.S. sales were about 16.5 million last year.

Mark McCready, vice president of market planning and pricing for the Carsdirect.com automotive Web site, said buyers were distracted first by taxes and then by bad weather in the Northeast.

If gasoline supplies continue to be stressed as the country enters the peak summer driving season, he sees prices going up. .

The Big Three are still heavily reliant on pickup trucks for sales and profit, and that market likely will continue to decline, said Erich Merkle, an industry analyst with auto consulting company IRN Inc. in Grand Rapids.

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