GM says February Not a Good Month but Not a Bad Month for New Car Sales, It Could have Been Better But it could have been worse.

DETROIT February 25, 2004; Tom Brown writing for Reuters reported that Paul Ballew, the chief sales analyst at General Motors Corp., said on Wednesday that February was "not a great month" for U.S. vehicle sales but it wasn't all bad either.

"All in all, not a bad month, not a great month, but pretty close to expectations," Ballew said when asked about monthly sales results for an industry that accounts for about 4 percent of the U.S. economy.

Speaking in a Reuters interview, Ballew said he sees February light vehicle sales, which automakers will report Tuesday, coming in at a seasonally adjusted annual rate of 16.2 million to 16.3 million units.

That's in line with most other analysts surveyed by Reuters and it would be better than a year ago when Iraq war fears and the wobbly U.S. economy helped push sales down to an annual rate of about 15.5 million vehicles.

It would be down from a brisk annual rate of 17.9 million in December, however, and mark only a wafer-thin improvement over surprisingly weak sales in January.

Nonetheless, Ballew shrugged off fears that the year has gotten off to a slower-than-expected start. And hinting at a generally upbeat mood at the world's largest automaker, he also played down the dim reading of U.S. consumer sentiment reported by the Conference Board, a private research firm, on Tuesday.

"We assess that consumers are reading things correctly," Ballew said. "The economy is improving, there's still some uncertainty over jobs, but directionally things are improving. And overall consumer sentiment is fairly good. It's not great, but it's fairly good."

GM has said it expects industry sales, buoyed by the economic recovery and eventual employment gains, to hit an annual rate in the mid- to high-16 million range this year.

David Healy of Burnham Securities echoed other industry analysts in cautioning on Wednesday that light vehicle sales were lagging expectations, a factor that could soon lead toward higher consumer sales incentives.

"Given the way the economy is going and everything else, I would have expected the (February) numbers to be stronger." Healy said.

But Ballew, who declined to comment on GM's specific results in February, said analysts tend to read too much into any one month, especially after the incentives-driven run-up in sales late last year.

"We're coming off an exceptionally strong December and a very strong second half, and we expected the first quarter to be a little softer," he said.

"You get this spike in vehicle sales in December and then you come back down to earth a bit in January and February and people tend to overreact," he added.

INVENTORY ADJUSTMENT?

With their February sales reports on Tuesday, GM and Ford Motor Co. , the second-largest U.S. carmaker, will also issue their second-quarter production forecasts, which are closely watched since they have a direct impact on earnings.

The automakers could also adjust their first-quarter production schedules, given what industry analysts have flagged as their current high levels of inventory.

Analyst Gary Lapidus of Goldman Sachs, who cut his full-year earnings estimate for Ford earlier this week, said in a research report that GM is likely to boost its second-quarter production by 1.4 percent over the same quarter last year.

Ford, meanwhile, is expected to cut its scheduled vehicle output by 3 percent from the second quarter of 2003, Lapidus said.

"The new year's vehicle sales rate is running well below that of late 2003 and well below most forecasts," Burnham's Healy said in a monthly sales report.

"Unless the selling rate revives smartly in March, both second-quarter production schedules and optimistic full-year 2004 sales forecasts will probably have to be trimmed."