Sales Doldrums Could Hurt Big 3

by : Anthony Fontanelle



Sales doldrums this month could mean trouble for the turnaround plans of Detroit's Big Three car makers. This prediction is intimated by several analysts in the automotive industry.

Five analysts predicted that sales in the United States will plummet in April as compared with the same month in the previous year. Further, in a down market that continues to move from trucks to cars, the situation spells trouble for Detroit. Analysts added there does not seem to be any pent-up demand for vehicles. Additionally, purchasers either have too much debt or are anticipating a decline in gasoline prices.

Under those circumstances, it will be hard for the Big Three to carry out their turnaround plans because they are competing for a dwindling market mainly against Japanese automakers like the Toyota Motor Corp. and the Honda Motor Co., which both have tough product lines.

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

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

GM reported a gain in the fourth quarter of 2006 and by most accounts is ahead of its U.S.-based counterparts in restructuring. Still, the gain is not enough to offset its previous losses. Also, the restructure program also needs a power boost.

Barker predicted that April sales at a yearly rate would be up and about 16 million vehicles. In 2006, American sales were about 16.5 million last year. Thus, it is high time for the automakers rely on the braking to experience a halt in ominous occurrences in the auto market.

Mark McCready, the vice president of market planning and pricing for the Carsdirect.com automotive website, said that 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, McCready sees prices going up.

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