Transcripts

Car Makers Hope To Drive Up Sales This Spring

PAUL KANGAS: February was a big disappointment for two of the nation`s big auto makers. Both General Motors and Ford saw vehicle sales shift into reverse, while sales for Chrysler were up. As Diane Eastabrook reports, the numbers are causing concern as the industry heads into the spring selling season.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: February was full of surprises for the U.S. auto industry. Some analysts thought GM and Ford would see vehicle sales improve during the month, while they expected Chrysler to see sales decline. But the opposite happened. February sales dropped 4 percent for Ford compared to the same period last year. They were down 2.5 percent for GM. Sales increased 3 percent for Chrysler Group. But Edward Jones analyst Linda Bannister, whose company has an investment banking relationship with Ford and GM, says the concern now is sliding market share.

LINDA BANNISTER, AUTO ANALYST, EDWARD JONES: GM and Ford are cutting costs, but unless they can stabilize their market share, three years from now we`re going to be in the situation where the companies have to undertake dramatic cost cutting once again.

EASTABROOK: While Ford`s sales were basically dismal overall, GM did have some success with its new redesigned sport utilities, like the Chevy Tahoe which saw sales jump nearly 50 percent. But automobile sales for GM plunged 13 percent. Analysts blame the decline on poor fleet sales, but they also admit the auto maker comes up short when competing with Asian companies.

JOHN NOVACK, AUTO ANALYST, MORNINGSTAR: There`s increasing competition. In the latter half of this year, you have the new Camry coming out, you have Honda with new products and GM on the car side is very weak in terms of their product line-up.

EASTABROOK: Industry watchers say both foreign and domestic auto companies face a lot of uncertainty in the months ahead. There continues to be fear that gasoline prices will spike gain, sending truck sales into a freefall. And there is concern that a weaker housing market will make it difficult for consumers to tap homes equity to buy new vehicles.

BANNISTER: If car sales overall decline in the U.S. because consumer spending slows, Ford and GM are going to be in a very difficult position, because from a competitive standpoint, they`re disadvantaged and if we see contraction in the overall market, it`s going to hurt them dramatically.

EASTABROOK: There is also concern that continued sluggish sales will mark the return of steep incentives, which means lower profits for struggling manufacturers. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.