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LOUISVILLE, Kentucky, April 23 (Reuters) - The crisis in the U.S. mortgage market has hurt U.S. auto sales this month, a senior General Motors Corp.GM.N executive said on Monday in one of the highest-profile warnings on the risk of spillover from weaker housing to other areas of the economy.
GM Vice Chairman Bob Lutz, who was in Louisville, Kentucky to attend an automotive industry conference, said he did not know how GM’s sales had performed in April, but said he expected the whole automotive sector would feel the impact of the stress on the housing finance market.
“The market as a whole has been a little weakish. That has come as a result of the housing market problems and the mortgage industry meltdown,” Lutz told Reuters. “A lot of people are finding themselves in a position of reduced affordability and that has had an impact, not just on us, but across the industry.”
GM and other automakers will report April U.S. sales results on May 1.
For the first three months of the year, U.S. industry-wide auto sales were down 1.2 percent from a year earlier.
GM, and its Detroit-based rivals Ford Motor Co. F.N and Chrysler Group, had forecast a flat to slightly weaker vehicle market going into 2007 before the pressure on subprime lenders intensified.
Monday’s comments from Lutz followed other cautionary remarks from GM executives on the expected impact from the subprime mortgage crisis on the world’s largest automaker.
GM’s head of North American operations, Troy Clarke, said earlier this month that the automaker’s U.S. sales would be weaker in the second quarter as a softer economy, high interest rates and pressure on the subprime mortgage market dampens demand for new vehicles.
GM in March also said it expects results from finance company GMAC, in which it retains a 49-percent stake, to remain under pressure this year due to increased defaults in subprime mortgages or loans to borrowers with poor credit.
Weak housing starts have also weighed on sales of high-margin pickup trucks, often bought by construction workers.
GM shares closed down $1.01, or almost 3.2 percent, at $30.67 in Monday trade on the New York Stock Exchange.
CUTS ON FLEETS, INCENTIVES
GM is in the middle of a sweeping restructuring that includes slashing more than 34,000 jobs and closing 12 plants.
As part of its turnaround strategy, GM is also cutting back on its fleet sales -- which are typically low-margin sales to daily rental companies and government agencies.
GM, known for aggressive discounting in recent years, is also trying to stick to a strategy of clearer and higher pricing and fewer incentives at its showrooms.
“We are obviously taking it easy on pricing,” Lutz said. “When you rely too much on incentives and on daily rentals, you trash your residual value.”
“We forced the market by jamming too many into the daily rental companies,” Lutz said. “We found out we would never win this thing unless we backed off on this policy of forcing the market.”
The new strategies have cost GM U.S. sales and market share in a year in which it is expected to be challenged for the top spot in global sales by Japanese rival Toyota Motor Corp. 7203.T.
GM’s U.S. sales were down 5.5 percent in the first quarter. Toyota sales up 11 percent in the same period.
((Reporting by Michael Lindenberger, writing by Jui Chakravorty and Kevin Krolicki, editing by Deborah Cohen; Reuters Messaging: Jui.email@example.com; email: firstname.lastname@example.org; tel:313-967-1903))
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