US Vehicles Sales Could Hit Thirteen Year Low (GM)(F)

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GM (NYSE: GM) and Ford (NYSE: F) already trade near 52-week lows because of high gas costs and the rising prices of commodities for components used in cars.

Now, JP Power is dropping its estimate for US light vehicle sales to 14.95 million. The research firm had earlier put up an estimate of 15.7 million.

According to Power "In the first quarter of 2008, sales are expected to average 15.2 million units, with sales in the second quarter falling to approximately 14.8 million units before beginning a slow rebound during the second half of the year and into 2009."

With vehicles sales of about 16.1 million in 2007, a drop to 14.9 million or below would be worth about $32 billion in total US car revenue based on an average price of $25,000 per vehicle. At current market share levels, the could push GM’s US revenues down by $8 billion and Ford’s down by $5 billion.

Neither company has the cost structure in place to weather that. Any savings from the UAW contract and cost cuts in 2006 are now in place and there is not much left to take out.

That means that loses at the big US car companies will be much greater than forecast just a month ago.

Douglas A. McIntyre