Ford and General Motors Announce Production Cut-Back

03 September 2004

August's disappointing sales drop has led Ford Motor Company and General Motors to cut planned vehicle production in the fourth quarter of 2004.

America's two largest automakers both suffered the plight typical of the industry as a whole, which saw a 5.6% fall in car and light-duty truck sales compared with August 2003 according to Ward's AutoInfoBank.

After a 7% overall sales slump, GM plans to curb production by 6.8% to 1.29 million vehicles, with most cuts coming from light-duty trucks. Ford aims to go even further, reducing production by 7.8% to 830,000 vehicles, mainly by cutting back on trucks.

Both companies blame high gasoline prices and the rocky US economy for the slide in August sales, while industry executives cite the later than usual Labor Day, effects of Hurricane Charley and comparisons with last August's exceptional sales performance.

Diane Swonk, chief economist at Chicago's Bank One, is more critical of the automakers' sales methods: "Their situation is more one of saturation and excessive incentives earlier that borrowed from their future."

The auto giants may, however, need to rely on bigger and better incentives to shift the accumulating piles of unsold vehicles. GM had 1.15m unsold cars and trucks in August, over half leftover 2004 models.

Jesse Toprak, director of pricing analysis at auto research website, points to the high 'days to turn' figures for both GM and Ford. This measures the time taken for a car to be bought from when it arrives on a dealer's lot, and is 72 days on average. GM's July figure was a record 91 days, while Ford's was 92.

Japanese carmaker Toyota was not immune to sales problems, suffering its own slump of 2.8% in August. Its sport-utility models dropped by 17.9%.

However, DaimlerChrysler's Chrysler unit bucked the trend, with a 1.8% increase and rise of 21.9% for car sales. Luxury brands also fared better, with Porsche, Mercedes Benz and Volvo all posting sales gains.

Data sourced from: New York Times; additional content by WARC staff