Big Three Lost Purchasers In June |
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Anthony Fontanelle
July 5, 2007
The Detroit’s Big Three share of the American auto market dived to a record low in June, statistics showed last Tuesday thus predicting another summer of deep discounts, cheap car loans and deals on leases.
The General Motors Corp. had its worst month in nine years as its sales of cars and light trucks dropped more than 24 percent from the period a year ago. It plummeted to a market share of 22.1 percent, according to an estimate by the Autodata Corporation, a firm that tracks industry statistics.
Sales also dropped at the Ford Motor Co. and the Chrysler Group, although not as gravely as that at GM, while Japanese competitors all reported significant raises. Ford said that its decline was because of its voluntary cuts in less-profitable sales to rental car companies.
Overall, Detroit automakers wound up only about 3,000 vehicles ahead of their foreign competition for June. Auto analysts said that it could be only a matter of time before Detroit’s market share fell below 50 percent. To keep that from happening, “there are all the indications that we’re going to see an incentives war this summer,” said Jesse Toprak, the director of industry analysis at Edmunds.com, a car-buying Web site.
Paul Ballew, GM’s chief sales analyst, acknowledged that its sales in June fell short of the company’s expectations. But he said that total sales for the first half of the year did meet the goals GM set in its turnaround plan. He added that the largest American automaker, which introduced no-interest financing plans after the September 2001 attacks to help give a boost to the American economy, now is pondering how it should respond to bigger discounts being offered by its rivals, chiefly Toyota.
Sales of the big Toyota Tundra pickup truck increased in June, after the Toyota Motor Corp. started offering five-year no-interest loans and thousands of dollars in rebates on the truck, which it introduced in February. Toyota executives said that sales were particularly strong in Texas, an important market for Detroit’s pickups and the home of the Tundra factory in San Antonio. In contrast, sales of the Chevrolet Silverado, which has been only the market only since last fall, fell 24 percent.
“In June we just had competitors flailing away,” Ballew said. “We don’t think we have to match dollar for dollar, but we’re not going to allow a competitor to try to steal sales away.”
Toyota officials stressed that the company, on average, paid less in incentives than Detroit automakers. They said word of mouth had helped spur sales of the pickup, and pointed out that the pickup truck market had long had some of the deepest discounts in the vehicle business.
Toprak expects to see more subtle discounts, like lease incentives and no-interest financing, rather than cash rebates or the ‘employee pricing’ deals of two years ago that temporarily lifted Detroit sales but led to steep declines when they were discontinued.
The Big Three has been trying to get away from such discounts because it hurts their brand images, the resale value of their vehicles and their profit margins. But all three companies have no other clever option.
James Lentz, the executive vice president of Toyota Motor Sales, said that the discounts did not indicate a new strategy for the company. He said such deals could help win over shoppers who might otherwise not be able to afford a new vehicle because the value of their trade-in was less than their remaining loan.
The doldrums also affected Mercedes-Benz USA, which sold 19,589 units, down from 20,802 in June 2006. Critics said that product lines and auto parts like the Mercedes Benz oxygen sensor might need timely upgrades.
Source: Amazines.com