March Sales Seen Down for GM

General Motors Corp. (GM), which warned earlier this week it expects sharply lower profit this year, will see little relief from its March U.S. vehicle sales, which are expected to fall by as much as 10 percent, analysts said Friday.

Despite new sales incentives, the world's largest automaker will again lose U.S. market share to foreign automakers, leaving it with an excess of unsold vehicles even after it has already made painful cuts to car and truck production this year, analysts said.

GM Chief Executive Officer Rick Wagoner (search), speaking to analysts and reporters earlier this week, said of March sales; "It looks like March is going to be better than the first two months."

GM's U.S. sales fell more than 6 percent in January and February for a U.S. market share of about 25 percent, far below its share of 27.3 percent in March last year.

"We think GM will be down about 10 percent this month," said Jesse Toprak, a senior analyst with, which tracks industry sales and incentives.

Conversely, Asian carmakers Toyota Motor Corp. (search) , Nissan Motor Co. Ltd. (search) and Hyundai Motor Co. Ltd. (search) will see double-digit sales gains, Toprak said.

Wagoner said that GM's sales incentive strategy of zero percent financing and high cash rebates, launched following the Sept. 11 attacks, has been paying fewer dividends in recent months. He and GM Chief Financial Officer John Devine outlined GM's new sales strategy of pricing vehicles closer to the transaction price, to cut back on incentives.

"Their current strategy has failed. To me, it's an abrupt about-face," one Wall Street analyst said of GM's new strategy.

Another big decline in sales would come despite GM's new "March Madness" sales incentives, which include additional cash rebates of up to $1,500 on the sale of GM vehicles that have gone unsold for 125 days or more. GM has also cut prices on its mid-size sport utility vehicles, but Toprak said that GM failed to effectively advertise the new prices.

Deutsche Bank said in a report this week that GM dealers are reporting an 11 percent drop in March sales so far, and the automaker could lose a full 2 percentage points of market share.

"Our channel checks indicate that GM's retail sales are down double digits again," Lehman Brothers wrote in a report this week. "We are expecting them to end the month down 3 to 4 percent."

That would leave GM with excess car and truck inventories of 200,000 to 300,000 vehicles in North America, Lehman Brothers said. Inventories of GM's full-size pickup trucks and SUVs, key to GM's earnings, will grow to a more than a 100-day supply, Lehman said. GM's share of the full-size SUV segment dropped to about 38 percent in February from 65 percent in September 2002, Toprak said.

For the first six months of this year, GM has forecast a cut in its North American vehicle production by 304,000 cars and trucks, down 11 percent from year-earlier levels. Any cut in production deals a direct blow to earnings, because the automaker counts profit from vehicles when they are shipped to dealers, rather than when they are sold from showroom floors.