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Declining Truck Sales Cripple Gm
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General Motors Corp.'s sales sagged in June as demand for its small cars dropped. Also, aggressive discounting by the Toyota Motor Corp. injured GM’s pickup trucks. Of the Detroit Big Three, GM suffered the largest monthly decline, with sales diving 21.3 percent - the number is slightly weaker than June last year.

Overall, vehicle sales fell three percent from year-earlier levels, and the drop would have been sharper if there had not been an extra selling day in June. On a seasonally adjusted basis, the annual selling rate dropped to 15.6 million vehicles in June from 16.2 million a year earlier.

GM's truck sales were down 22.9 percent. The figures reflect big declines in its new Chevrolet Silverado and GMC Sierra pickups, which offered incentives averaging less than $3,700 in June. Sales of the GMC Sierra pickup dropped 26.5 percent, while sales of the Chevrolet Silverado fell 23.5 percent. GM is contemplating on its rejoinder. "If we have to make changes in our incentives play, we will," said Paul Ballew, GM's director of industry analysis. "We're certainly not going to cede ground in a category where we're best in class."

Additionally, the Ford Motor Co.'s sales fell 8.2 percent, for an eighth consecutive monthly decline, and the DaimlerChrysler AG's sales were down 1.8 percent. But leading Japanese automakers reported remarkable gains.

"The industry is substantially below normal levels right now and below where we'd like it to be," Ballew said. In addition, "we weren't anticipating that Toyota would go zero (percent interest) for 60 (months) on a brand new truck, and that has hurt our results," he said.

Toyota offered big discounts on the Tundra to put its introduction back on track. Demand for the first full-size truck from the Japanese automaker was running below the company's annual sales target of 200,000 units. But in June, Tundra sales more than doubled to 21,727 after Toyota offered no-interest loans and other incentives amounting to $5,083 per pickup, according to data firm Edmunds.com.

"The only large truck with a higher level of incentives in June than the Tundra was the (Dodge) Ram," said Alex Rosten, the manager of pricing and market analysis at Edmunds.com. "Everybody else was lower."

Jim Lentz, the executive vice president of Toyota Motor Sales USA, explained Tundra’s incentives: "Any time a manufacturer puts incentives (on a vehicle), it's probably deeper than they want to go." However, "in a segment like full-size trucks, customers expect and in some cases need incentives to help them out of negative-equity positions," Lentz added referring to trade-in vehicles worth less than the payments owed.

The ferocious truck competition mirrors the hardship domestic automakers face as they try to patch up bad habits like excessive discounting. In the previous months, they have reined in low-margin sales to rental car companies that had bolstered their volumes but slashed their profitability. That was the main reason for a 24.7 percent drop in Ford's car sales in June, said Ford industry analyst George Pipas.

GM executives said that they had anticipated a slowdown in June as the company scaled back its business with rental car companies. But the effects of anticipation were not hindered by the Saturn brake pad.

"Our retail performance for the month was also below the solid running rate we've experienced for the first half of the year, which we attribute to a soft industry and lower incentive spending than our competitors," said Mark LaNeve, the GM vice president for North American sales. "However, we continue to believe that maintaining a disciplined approach to both incentives and daily car rental sales is key to making our marketing strategy work in the long run.”

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