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The eBearing News
September 3, 2004
General Motors and Ford
Announce Production Cutbacks
copyright © 2004 eBearing Inc.
General Motors Corporation (USA) and Ford Motor Company (USA) have announced they will
cut U.S. vehicle production by at least 165,000 units in the coming months.
The announcement comes at a bad time for bearing manufacturers, most of whose sales
are tied in some way, directly or indirectly, to the U.S. auto industry, its suppliers
or industrial equipment used in those plants.
Industrial bearing sales had only recently begun to show signs of continued strength
which might continue through 2004, but an offsetting loss of automotive-related sales
could stall that progress.
A variety of factors, ranging from higher oil prices to Hurricane Charley, were blamed. Sales
fell 13% in August for Ford, while General Motors light vehicle sales fell 14%.
The sales problem is all the more difficult to analyze because it came in the face of
heavy discounting by both companies, in addition to rebates and low-cost financing offers.
Ford said it will now build approximately 830,000 vehicles in North America during third
quarter 204, down almost 8% from 900,000 in third quarter 2003.
General Motors said its analysts believe the overall market for new vehicles fell by more than
5% in August. Through August, GM's U.S. market share stood at 27.5%.
On those results, GM announced it will build 1,290,000 vehicles in third quarter 2004, down
almost 7% from 1,385,000 in third quarter 2003. GM's second quarter 2004 production had been
down 5% from 2003's.
It is not yet clear if the cuts and new car market softening are as fundamental as
GM analysts have projected. Toyota, Honda, and others have not yet released their
production planning for the remainder of the year. And some of the biggest losers have been
GM's and Ford's cash cows -- trucks and SUVs. Sales of GMC Suburban SUVs fell 38% in August, for example.
Light trucks, which usually can be counted on to remain strong or at least steady at times
of light automobile demand, were also down. GM, for example, had 85 days inventory on hand
at the end of August, up from 76 days at the end of July.
DaimlerChrysler, for its part, said Chrysler Corporation's U.S. sales in August
were essentially flat from 2003, while Mercedes-Benz brand sales were up slightly.
Separately, GM Chairman and CEO, Rick Waggoner, said the company may unilaterally impose
additional cost cuts on its suppliers if sales do not improve. He said that if GM is not able
to improve sales, it will have to find other ways to meet the self-imposed $7.00 per share earnings target
that Wall Street is expecting.
While suppliers may find it disingenuous for GM to penalize them for an overly-aggressive earnings
promise made to Wall Street, their dependence on those sales puts few in any position to complain publicly.
Mr. Waggoner said, "I hope that sales do pick up over the next few months and run well, and with
robust production, I hope we can exceed the forecast. But we've got to, at least at this point,
plan for tightening up."
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
trademarks of eBearing Inc.
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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