Thursday, July 01, 2004

New vehicles have been a consistent site of deflation in the United States. It looks like things aren't about to get any better, either.
General Motors Corp. and Ford Motor Co. on Thursday posted double-digit declines in their U.S. vehicle sales in June, dragging industry sales to the lowest rate in nearly six years.

The top two U.S. car makers' failure to offer sweeter incentives to consumers accustomed to large discounts, coupled with their aging vehicle lineup matched against newer models from Japanese rivals, drove Detroit's share of the U.S. market lower.

The Chrysler arm of DaimlerChrysler AG posted just a 1 percent increase, on the success of its new Chrysler 300 sports sedan.

The surprising 6 percent drop in industry sales to a seasonally adjusted annual rate of 15.4 million was the weakest performance since strikes crippled industry leader GM in the summer of 1998. . . .

With June's weak results, GM and Ford said that inventories of unsold vehicles climbed last month, but neither cut their car and truck production estimates for the third quarter, which usually indicates that higher incentives are on the way.

Both GM and Ford have said recently that they will extend the traditional two-week summer shutdown at some of their plants by at least one week, to help reduce bloated inventories.
Although the tone of this and all the other news articles on this story is "bad for Detroit, good for everybody else," note the 6% decline in the industry overall. Year-over-year US consumer prices on new vehicles have fallen an amazing 39 months in a row, and it looks like June 2004 will make it a nice round forty. Since 1997 (hint: East Asian financial crisis, anyone?) US auto prices have declined steadily, about 5.5% overall in nominal terms. Years and years of overproduction and still no end in sight.

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