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Auto Sales Lag Behind Economic Growth in October

November 4, 2003

Despite signs that the U.S. economy is gaining steam, new vehicle sales were disappointingly flat in October, with General Motors Corp. and Ford Motor Co. both losing ground to foreign rivals, according to reports in the New York Times and Detroit News.GM's sales fell 7.7 percent from robust year-earlier levels, while Ford's sales dipped 2.8percent, with growing sales of the new F-150 full-size pickup failing to offset a 9 percent slump in car sales.At Chrysler, demand rose 11 percent from weak levels a year ago, with the Dodge Ram truck holding ground against the new F-150. "We'll see additional sales incentives from GM over the next two months, because they've made clear their intent to at least maintain market share," said Paul Taylor, chief economist at the National Automobile Dealers Association (NADA) in McLean, Va. "The other two (Detroit automakers) have generally followed suit," Taylor said."We realize three-peating will be tough," said Paul Ballew, chief sales analyst at GM. "The important thing is that we'll end the year somewhere in the 28 percent range."Stephen Girsky, the auto analyst with Morgan Stanley, noted in a conference call that GM ended October with a 90-day inventory of unsold vehicles, well above the 65-day level that is normal for this time of year. Chrysler wound up the month with an 87-day supply; Ford did not disclose its inventory.Girsky wondered why GM would increase production, given the industry's slower pace. Ballew said it was too soon to write off November and December. "I wouldn't accept our sales as weakening or the industry as weakening," Ballew said.George Pipas, chief sales analyst at Ford, said he also expected incentives to climb in Novemberand December, and signaled that Ford's F-150 pickup could be in store for more generous discounts. Ford sold 18,000 of the new trucks inOctober, out of a total of about 68,000 F-series, but Ford eventually will have to sell more than 45,000 a month to meet its goal of selling 500,000 a year of the new model. The only discounts available thus far are to previous F-series owners."The F-150 has gotten off to a slow start, but is getting a lot of good word of mouth from consumers," said Taylor of the NADA.
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