GM Still Sees 2003 Sales Hitting Mark

DETROIT Sharon Silke Carty writing for Dow Jones reported that General Motors Corp. sees 2003 auto sales coming in line with expectations, not withstanding a protracted war in Iraq, said Paul Ballew, executive director of market and industry analysis.

Speaking in New York at the GM/GMAC Global Relationship Bank Conference, which was broadcast on the Web, Ballew said the company is sticking to its 2003 forecast of industrywide sales of 16.2 million to 16.5 million cars and trucks.

"We're trying to make the best assessment, unless something goes wrong beyond the current frame of what we're expecting in the Middle East," Ballew said. The company has a "downside scenario" that calls for industrywide sales of 15.5 million to 16 million cars and trucks.

Used car prices are leaving GMAC's balance sheet look less robust than would otherwise be, said Eric Feldstein, chairman and president of GM's financing arm.

First, used car prices are making the company's losses on delinquent loans look less healthy than they may actually be, he said. The company booked $784 million in losses in 2002, up from $586 million in 2001 and $394 million in 2000.

Feldstein said the frequency of repossessions is down to 1.86% of loans outstanding from a high of 3.59% in 1996. What's making the losses cut deeper is that now, with used car prices bottoming out, GMAC takes a bigger hit when trying to resell the repossessed cars than it had in the past. In 1997, the company took a $5,195 loss per new car it resold after a repossession, but in 2002 it took a $7,703 loss per repossessed car.

"We take comfort in the frequency of loss numbers," Feldstein said. "It means GMAC is still making good credit decisions."

Used car prices are also damaging GMAC's lease resale figures. While the company is still making a profit, or book gain, for every lease it resells, that figure was down to $212 per car in 2002 from $1,080 in 1997.

But Feldstein said the company was conservative with its "residual" value estimates - meaning that when GMAC leased cars, its estimate for the used resale price was lower than other companies would have forecast. And now, he said the company expects to see used car prices begin to even out as the number of cars coming off lease begins to slow down. Off-lease cars had been flooding the used car market in recent years, peaking at 738,000 GMAC cars coming off lease in 2002. Feldstein said the company expects around 400,000 cars to come off lease in 2004.