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Vehicle sales jumped 11 per cent in Canada last month, the only glimmer of good news on a gloomy day of falling U.S. sales, production cutbacks at the two largest North American auto makers and warnings from parts makers about tough times.

Sales in Canada rose to 102,839 cars, trucks, minivans and sport utility vehicles from 92,463 in February, 2004.

But in the U.S. market, a 13-per-cent slump in General Motors Corp. sales and a 3-per-cent slide at Ford Motor Co. offset gains at DaimlerChrysler Corp., Nissan Motor Co. Ltd. and Toyota Motor Corp.

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"This industry has 100 little things wrong with it and very few positives," said auto analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ont.

Among the problems are a once-robust market that appears to have run its course and a lack of profit in major sectors in the industry, Mr. DesRosiers said.

The gloom was deepest yesterday at GM and Ford, both of which announced cuts in production at their North American plants in the first and second quarters.

Their fortunes are running in opposite directions to those of DaimlerChrysler, which enjoyed a sales gain in February and is in the midst of increasing output of hot-selling passenger cars at a plant in Brampton, Ont.

GM's U.S. market share slid to 24 per cent in February, down from 27 per cent a year earlier.

The cuts at Ford and GM come on top of reductions already announced by the two auto makers.

GM will slash North American output in the second quarter by 10 per cent from year-earlier levels.

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That trim will ripple through the automotive chain and especially down to auto parts suppliers, which are already grappling with surging steel prices and unceasing demands from the auto makers for price cuts.

Even before yesterday's announcements, production cuts were deeper than expected, Magna International Inc. president Mark Hogan said yesterday.

"There are no surprises here that the first half of 2005 will be challenging," Mr. Hogan told analysts and investors during Magna's fourth-quarter and year-end financial results conference call yesterday.

Magna's chief financial officer, Vince Galifi, noted that a 3-per-cent price cut on a $700 part means a $21 reduction that has to be made up elsewhere just for the company to stay even.

The production cuts, price pressures and soaring increases in prices for steel and resin for plastic parts contributed to Magna scaling back forecasts it made last month for increased sales this year.

Sales are expected to be in the range of $21.8-billion (U.S.) to $23.1-billion, down from the previous forecast of between $22-billion and $23.5-billion.

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Nonetheless, company officials predicted yearly profit will rise, based on an expected improvement in the second half of the year.

"We are well capitalized and among the strongest manufacturers, and this is a good position to be in when the operating environment is difficult and many suppliers are weakened," Mr. Hogan said.

U.S.-based interiors giant and Magna rival Lear Corp. joined in the grim parade yesterday, after lowering its forecast for first-quarter results to break-even from a previous forecast of profit of 50 cents to 70 cents a share.

On the sales front, DaimlerChrysler Canada Inc. and General Motors of Canada Ltd. had strong months in the Canadian market with gains of 25 per cent and 22 per cent respectively. Sales at Ford Motor Co. of Canada Ltd. were flat.

BMW Canada Inc., Honda Canada Inc. and Hyundai Auto Canada were also on the positive side of the ledger as sales in Canada rebounded from a January decline.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More


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