GM sales forecast to plunge

Auto sales tracker Edmunds.com forecasts a 32 percent drop in sales at troubled No. 1 automaker from year-ago sales record; gains expected to continue at Toyota, Honda.

June 28 2006: 11:06 AM EDT
NEW YORK (CNNMoney.com) -- General Motors could see U.S. June sales down almost a third from a year ago, the sharpest year-over-year drop at the embattled automaker since 2002, according to a forecast from Edmunds.com.

If Edmunds is right, the decline would be worse than expected.

A sharp drop in sales would not be a complete surprise, however.

Mark Sleeve, GM vice president, North America vehicle sales, service and marketing, told analysts Tuesday that the company's record sales in June 2005, coupled with weaker industrywide sales in the face of high gasoline prices this year, would create "especially brutal" June comparisons.

GM's popular "employee discount" incentive sparked high sales a year ago. Ford and Chrysler followed GM in that offer a little later, but in June GM had the field to itself, and it sold a record 550,829 autos in the United States.

"Last summer, the domestics enjoyed great success because of the employee discount program," said Jesse Toprak, executive director of industry analysis for Edmunds.com. "They haven't yet found the silver bullet for 2006, but they sure could use it."

As bad as the year-over-year sales would be, Edmunds forecast of GM sales of 376,000 vehicles in June would actually be up 11 percent from its weak May 2006 sales total.

GM executives said Tuesday that its 2006 sales have been hurt by an industry shift away from light trucks, a category that includes traditional Suva's and pickups, as well as the company's decision to cut back on less profitable "fleet" sales to corporate customers, especially rental car companies. GM's loss of retail market share would be far less than its over drop in sales, the company predicted.

Still a 32 percent drop would be the biggest since a 31.9 percent decline in October 2002, which was also a comparison to a month with a popular sales incentive - GM's introduction of zero-interest financing in the wake of the Sept. 11 terrorist attack a year earlier.

GM has been trying to wean its customers from those kind of costly incentives. It has cut both the list price and the value of incentives on most of its models.

But now, with Chrysler and Ford (Charts) offering new incentive programs to clear out their 2005 models, GM brought back zero-interest financing Tuesday, announcing it would offer that incentive through July 5.

Edmunds.com also forecasts that Ford's June sales will be down, but only 4 percent from a year earlier. Sales at Chrysler, the North American unit of DaimlerChrysler (Charts), are forecast to be down 7 percent, falling well behind Toyota Motor (Charts), which Edmunds expects to post a 19 percent rise from year-ago sales.

Honda Motor (Charts) is also forecast to see sharply improved sales. Edmunds forecasts a rise of 12 percent there, while Nissan (Charts), the No. 3 Japanese automaker in terms of U.S. sales, is expected to see its sales slip 3 percent from a year earlier