GM sees softer second quarter sales; plans summer incentives

UPDATED: 4/4/2007 4:58 P.M. NEW YORK (Reuters) -- Troy Clarke, General Motors' head of North American operations, said today he expects second-quarter sales to be softer than initially forecast due to a weaker overall industry than GM had anticipated.

Speaking on the sidelines of the New York auto show, Clarke said GM was scaling back production on some cars and mid-sized SUVs to cope with softer demand.

"We thought the market would be stronger," he said.

The U.S. auto industry is expected to be slightly weaker this year as a softer economy, high interest rates and pressures on the subprime mortgage market dampen demand for new vehicles.

GM's U.S. sales fell 4.0 percent in March, driven by big declines in sales of pickups and SUVs.

Sales of GM's Chevrolet Silverado pickup fell 8.6 percent, while GMC Sierra purchases were down 15.1 percent in March.

GM, which is in the middle of a sweeping restructuring that includes more than 34,000 job cuts and 12 plant closures, has been sticking to a strategy of lower-but-clearer pricing with few incentives as part of its turnaround.

For decades, the world's largest automaker has been known for a complicated pricing system that offered big, profit-reducing incentives.

GM's sales chief, Mark LaNeve, said today the automaker's pricing, incentive and marketing strategies have helped stabilized retail sales at a seasonally adjusted annual rate of about 3 million units.

LaNeve said GM plans to increase incentive spending on full-sized pickups in 2007.

"We look for that incentive level to rise, we hope modestly," LaNeve said. Clarke also said GM would offer summer incentives on various vehicles this year.

MINICAR TRIO

Separately, GM unveiled three concept minicars at the show, designed in South Korea and assembled in the United States and India. Product chief Bob Lutz said the cars could be launched 18 months from now in Europe and Asia.

Lutz declined to comment on where the cars would first be built but said India and China were "very logical candidates."

He also said the minicar would be branded Chevrolet in all markets except South Korea, where the identical vehicle will be launched under the Daewoo brand.

The vehicles could give GM, known for its focus on gas-guzzling trucks and SUVs, a foothold in the growing minicar market now largely dominated by Japanese automakers.

Lutz said the minicars would not be launched in the United States unless gas prices rose siginificantly "and stayed high for a couple months."

"There just isn't enough demand in the U.S. for such small cars right now," he said.

GM has seen sales outside the United States surpass domestic sales, with 55 percent of its 2006 sales occurring overseas.

"These cars will accelerate that trend," Lutz said. "They will grow the Chevrolet brand globally."

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