The US motor vehicle industry is in recession but General Motors has prepared for this with cost cuts and new products, the automaker’s president and chief operating officer Fritz Henderson told a conference of banking and insurance industry officials in Michigan.
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He said GM is selling below trends for the third straight year and blamed the sales drop on the troubled housing market, tight credit and higher fuel prices that are sending consumers from trucks to cars at a rate much faster than the company has ever seen, the Associated Press (AP) reported.
Henderson said GM also is seeing sales growth in emerging markets. The first quarter was about in line with expectations, but April’s sales drop was a surprise. He added that GM sees more downside risk than upside opportunity for the remainder of 2008.
According to the Associated Press, Henderson said the 11-week strike at parts supplier American Axle and Manufacturing (AAM) had had only a minimal effect on the company’s retail sales, largely because it had built up a large stock of pickup trucks and SUVs as demand shifted to smaller vehicles.
Henderson noted the strike cost GM US$800m in earnings before taxes in the first quarter, and he said the company had agreed to AAM’s request to provide $200m to help end the work stoppage by the United Auto Workers union.
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By GlobalData“We agreed to do that because we think it would be the most helpful thing we could do” to end the strike, Henderson said, according to AP. “We’re working hard to not be involved in those day-to-day negotiations.”
Reports in Detroit-based media this week have suggested the UAW is unhappy with AAM’s latest proposals, which include the closing of a plant where its members are on strike, though negotiations are continuing. The union is resisting AAM’s attempts to substantially reduce its members’ wages, saying it won’t give the GM supplier the same concessions as it has made to other companies because it made a substantial profit last year.
According to AP, Mike DiGiovanni, GM’s executive director of global market and industry analysis, told the conference the economy would rebound in the second half of the year but the pace would be sluggish.
“We’re starting to think that perhaps the trough of this downturn is going to occur in the second quarter,” he said, according to the Associated Press.
DiGiovanni added that the threat of a huge credit crunch has passed, and he predicted home prices would likely fall further. Home construction, which has a big impact on pickup truck sales, may be near the bottom of a slump, and the rate of decline is slowing, he said.
“I guarantee you pickup sales will come back,” he said.
GM in the past has focused its advertising too heavily on trucks, but is in the process of shifting that “to a new plan that’s really going to focus on miles per gallon,” DiGiovanni added, according to the report.
He said GM would roll out 14 new cars and crossover vehicles in the next 18 months, but only one new truck, the Associated Press added.
