GM North America Chief Offers Bullish Sales Forecast

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North American Int’l Auto Show

DETROIT – U.S. auto industry sales likely hit bottom sometime last year, paving the way for improvement in 2008, a General Motors Corp. executive says.

“I’m optimistic enough to say there is some upside resiliency to the market,” GM North America President Troy Clarke tells journalists at the North American International Auto Show here.

GM’s forecast runs contrary to others that call for light-vehicle sales this year to finish below the 16.1 million Ward’s reported for 2007, with particular weakness in the year’s first half.

Related document: U.S. Light Vehicle Sales - December 2007

But Clarke says an uptick in December’s deliveries leads him to think the industry can at least match last year’s totals. Retail sales tracked by GM on a seasonally adjusted annual basis ran at 12.6 million to 12.7 million units in the three months preceding December, when they shot up to 13.7 million.

GM finished December with overall sales down 4.4% to 320,028 units from year-ago’s 334,846, according to Ward’s data. However, retail deliveries rose 1.5% to 257,469, the auto maker says.

“There was some end of the year (incentives) and seasonality, but I don’t think anyone was running any blowout sales,” says Clarke, who estimates GM’s spiffs increased a relatively meager $250 per vehicle in the final month.

Troy Clarke <i>(left)</i> congratulates Chevrolet General Manager Ed Peper after Malibu named 2008 North American Car of Year at Detroit show Sunday.

“It’s injected a little optimism that maybe the first quarter and second quarters don’t have to be as bad as a lot of people have said.”

Clarke thinks most consumers have internalized economic headwinds, but he still worries about unfavorable movement in adjustable-rate mortgages this summer. If interest rates go higher on subprime loans, the nation could witness additional home foreclosures.

“The next shoe to drop is the ARM (adjustable-rate mortgage) resets,” he says. “Once we work through that, there’s no reason we can’t look forward to a market at least as good as last year. And with the new product introductions that we have, (the market) could surprise us.”

In addition to its recently launched redesigned Cadillac CTS and Chevrolet Malibu sedans, GM products coming to market include the Saturn Astra and Pontiac Vibe compacts; a 4-cyl. Saturn Aura sedan; and hybrid versions of its fullsize SUVs and pickup trucks.

“I personally think it is hard to envision a quarter where the industry runs less than 16 million units,” Clarke says, noting GM’s forecast includes medium-duty vehicles. “I don’t see us returning to pre-1991 levels – the economy has grown too much. When was the last time we had a 15 million-unit market? Before 1990.”

GM’s new product cadence should help keep its incentive spending lower in 2008, he says. Last year, the auto maker exercised arguably its greatest incentive discipline in 10 years, and Clarke believes new models, such as the well-received ’08 Chevrolet Malibu, named North American Car of the Year at the show here Sunday, will continue the momentum.

“There are thousands of dollars per-unit-worth of value if we can continue to manage the retail side,” he says.

“The new Malibu starts at $19,995, but what’s the average transaction price of the old Malibu after incentives? It’s about $13,000. We’re talking thousands of dollars worth of price-difference opportunity there.

“The old Malibu had been in the market so long and sold in a number of different ways to include heavy rental, heavy leasing…We eroded the earnings potential. Now, I’ve got this new Malibu that I’m going to guard (and) sell better.”

Clarke draws additional confidence from GM’s inventory position, which numbers about 900,000 cars and trucks, or about 147,000 units lighter than prior-year. That’s the lightest stockpile with which GM has greeted January in 13 years.

“We’re in the right inventory situation,” he says. “We’re set up for a cold winter if it hits.” But Clarke doesn’t see rough sledding ahead.

“I think we’ve been in (a) recession, and I don’t think it gets much worse in North America,” he says. “If we’re not at the bottom, we’re pretty close. A recession looks a lot like what we just spent the last six months selling through.”