GM, Ford planning production cuts

By Earle Eldridge
USA Today

Salesman Sonny Jenkins shows a Ford Explorer to Philadelphia police officer Mike Gross as Ford Motor Co. plans for production cuts after flat February sales. Associated Press

General Motors said yesterday that it will cut production 10.5 percent in the second quarter, to 1.39 million vehicles from 1.55 million in second quarter last year. GM said February sales were off 19 percent from 2002.

The company blamed the production cuts on "consumer and economic uncertainty, as well as the effect of product startups and plant conversions."

Ford Motor, whose February sales were flat compared with a year ago, hinted that it also would cut second-quarter production but gave no details.

Merrill Lynch auto analyst John Casesa predicted Ford also will cut production by 10 percent.

Production cuts by the automakers could mean a further drag on the overall economy. The manufacture and sale of cars and trucks generates nearly 4 percent of GDP, according to the University of Michigan and the Center for Automotive Research.

For February, overall industry sales were down 7 percent. The seasonally adjusted annual sales pace fell to 15.5 million vehicles, the lowest since October's 15.5 million, according to Autodata. Automakers sold 16.8 million cars and trucks in the United States last year.

February sales were particularly bad in the Northeast and some southern states hit by record-setting snow and ice storms. But consumers also appear worried about the economy, possible war with Iraq, higher gasoline prices and job security.

Among the biggest automakers, only Honda showed a sales increase in February, up 13.8 percent. It was helped by sales of sport utility vehicles — the new Honda Pilot and Honda Element, as well as MDX from its Acura luxury brand.

Other than Honda, luxury brands were the only bright spot in February.

Mercedes-Benz and Saab reported their best February sales in history. Mercedes was up 8 percent; Saab rose 33 percent.

Other results: Cadillac up 16 percent; Infiniti up 58 percent; Volvo up 8 percent.

The strength of luxury brands reflects the expansion of their lineups to include more affordable vehicles and more SUVs, along with financial incentives.

It's part of a trend. Last year, sales for premium brands rose 8 percent over 2001, while sales for the overall industry fell 2 percent. Luxury brands had 10 percent of the market last year, up from 6 percent in 1996.