US Auto Sales Start Year Slowly

DETROIT January 24, 2003; John Porretto writing for AP reported that a potential war with Iraq and an incentives-led sales blitz in December have led to a sluggish start for auto sales in January, and analysts say that may lead to even more bargains for buyers.

Goldman Sachs & Co. said in a report this week that January's U.S. sales will be down 2 percent compared with last January and some 14 percent off December's torrid pace.

"There's no doubt that a lot of people bought their cars in the last quarter of last year, and that's taken a lot of people out of the market," said Alan Helfman, general manager of River Oaks Chrysler Jeep in Houston, one of the nation's largest Chrysler dealers.

"January historically is a slow month, but there's definitely that hangover effect," Helfman said.

GM in particular poured on incentives in December to meet year-end market-share goals and recorded a 36 percent increase in volume over December 2001.

However, analysts say that's likely to hurt the world's largest automaker at the start of 2003.

Merrill Lynch's John Casesa said in a research note Thursday that GM's end-of-the-year push has left it short of inventory. He predicts the automaker's sales will be off some 8 percent in January.

"The company is not likely to take this sitting down, so it will likely respond with new incentives anytime," Casesa said.

On Thursday, GM added $500 to existing $2,000 rebates on its full-size pickup trucks. The $2,500 rebates will be available on GM's Chevrolet Silverado and Avalanche and the GMC Sierra.

Ford Motor Co. quickly followed suit and began offering the same deal on most of its F-150 models. The programs expire Jan. 31.

GM also is offering to waive remaining lease payments for customers who lease or buy another new GM model between April 1 and Aug. 31. The offer expires March 31.

Ford last week introduced an offer to waive up to eight lease payments for customers buying or leasing a new Ford vehicle.

Casesa said he expects Ford's sales to increase about 3 percent this month and grow its U.S. market share by a point to 22 percent -- only the second time that Ford would hit 22 percent in the past 12 months.

Ford ended 2002 with a U.S. market share of 21.1 percent. GM's market share grew to 28.3 percent last year.

Casesa says DaimlerChrysler AG's Chrysler Group sales should be down about 5 percent this month "as the company remains reluctant to participate in Detroit's incentive war."

The U.S. auto industry had its fourth best sales year ever in 2002, selling 16.8 million cars and other light vehicles.

Merrill Lynch expects non-Big Three sales to increase slightly in January for a market share gain of about 1 percent to 39 percent after sizable share losses in December.

Gary Lapidus, an analyst with Goldman Sachs, said the possibility of war with Iraq adds to the lingering economic uncertainty that's hampering business.

Lapidus said the effects of a war with Iraq are likely to be consistent with the impact of the Gulf War, when auto sales declined 17 percent between the August 1990 troop buildup and the start of air attacks in January 1991.

"I really don't see things improving for a couple of months," said David Littmann, chief economist at Detroit-based Comerica Bank, noting that a successful resolution of matters with Iraq likely would give a nice boost to the auto industry.