GM, Ford post sales gains, pointing to May as '90s high Industry may exceed 16.2 million sales in month

Auto industry

June 04, 1998|By BLOOMBERG NEWS

DETROIT -- General Motors Corp. and Ford Motor Co. yesterday reported higher May U.S. vehicle sales as price discounts and a strong economy raised expectations that industrywide sales had hit their strongest monthly pace of the 1990s.

GM sales rose 13 percent and Ford's rose 2 percent from May 1997, both better than expected. Chrysler Corp. reported a 27 percent increase. Toyota Motor Co. and Honda Motor Co. also rose, and industry sales were up 16 percent through yesterday.

May's annual selling rate is expected to exceed December's 16.2 million, the highest since January 1990. The surge was spurred by discounts averaging $1,500 a vehicle, a sacrifice automakers can afford because of cost cuts and a more profitable vehicle mix. Equally important, buyers are well-heeled because of low interest rates, rising employment and a lofty stock market.

"Part of it is the incentives, but it's more than that," said James O'Sullivan, an economist with J.P. Morgan & Co. "We don't think there's any doubt that the consumer sector of the economy is still in very good shape."

May's seasonally adjusted annual selling rate could total about 16.4 million, predicted Michael DiGiovanni, GM's director of North American market analysis.

"The sheer volume of that demand means we're going to have a better year than people expected two to three months ago," said Alan Baum, an analyst with IRN Inc. in Grand Rapids, Mich.

Other analysts worried that the red-hot sales won't continue into the second half of 1998.

"The bad news is it can't last," said David Healy, a Burnham Securities analyst.

The industry's discounts, which were twice as high as in the year-earlier month, did probably pull sales into May from future months, GM's DiGiovanni said. Still, he predicted 1998 sales of about 15.2 million, slightly higher than last year, and rejected the notion that price discounts will hurt automaker profits.

GM's truck sales rose 20 percent to 226,564. Car sales rose to 256,191 vehicles, an increase of 7.3 percent from the year-ago month, when a United Auto Workers strike closed an important car assembly plant.

Ford car sales fell 5.5 percent to 139,622 but sales of pickup trucks, minivans and sport utility vehicles rose 7.6 percent to 213,212.

Ford's total sales would have been about 7 percent higher if it hadn't discontinued several slow-selling models that were in the mix last year, such as the Thunderbird.

Ford's ratio of high-profit sales is rising. In March, it added a third shift to the Kentucky plant that makes Super Duty commercial pickups, each of which generates a $10,000 pretax profit.

Pub Date: 6/04/98

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