updated 5/27/2005 8:04:55 AM ET 2005-05-27T12:04:55

After surprisingly strong auto sales in April, analysts predict demand was lower in May, a trend that could mean further production cuts at General Motors Corp. and Ford Motor Co.

May's slower pace can be attributed to higher gas prices, rising car loan rates and weak consumer confidence, Burnham Securities analyst David Healy said in a research note to investors. Automakers are scheduled to release May sales figures June 1.

Car prices also rose due to reduced incentive spending by GM, Ford and DaimlerChrysler AG's Chrysler Group. Vehicle prices, which fell 1.9 percent in 2003, have climbed 1.8 percent since September, Healy said. So far this year, the Big Three's average incentives per vehicle have been around $3,700, or $400 less than their peak in 2004, Healy said.

"Detroit seems to be accepting lower market share as the penalty for improved pricing," Healy said.

The domestic Big Three continue to be hurt by slower sport utility vehicle sales and aging vehicle lineups. Jesse Toprak, an analyst with Edmunds.com, said the Cadillac, Chrysler and Mercury brands probably are the only domestic nameplates that will see a year-over-year increase in May sales.

The Asian Big Three _ Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. _ likely will see sales rise by 5 percent in May, UBS Investment Bank analyst Robert Hinchliffe said in a note to clients. That's partly due to increasing incentive spending. Toyota spent a record $1,048 per vehicle in April, targeted at its slower-selling trucks, according to Autodata Corp.

Chrysler also will see a sales increase of around 3 percent, Hinchliffe predicted. But Healy said the hot-selling Chrysler 300 sedan began slowing down in April, so Chrysler's fortunes could be changing.

Several analysts predicted May's seasonally adjusted annual sales rate will be in the range of 16.6 million vehicles. The rate indicates what sales would be for the full year if they remained at the same pace for all 12 months. Full-year sales for 2004 were 17 million.

This month's sales rate isn't likely to match the brisk pace of May 2004, when the rate was 17.7 million, Merrill Lynch analyst John Casesa said in a research note. Usually, the Big Three raise incentive spending between April and May, but that didn't happen this year, he said.

Casesa expects GM's sales to fall around 2 percent from last May, and predicts the company's U.S. market share will stand at 26.8 percent. That's down from 27.2 percent last May but better than the 25.1 percent share in April.

"After four terrible share months, this will be relatively good news for GM," Casesa said.

Casesa also expects Ford's sales to drop 3 percent.

Several analysts predicted GM and Ford, which have substantially cut production in the first and second quarters, will continue to cut to get their large inventories under control. That would be unwelcome news for auto suppliers, who already have been pinched by first- and second-quarter cuts.

Hinchliffe said GM and Ford may choose to extend their traditional two-week summer shutdowns. He also expects GM and Ford to announce third-quarter production cuts of 4 percent and 1 percent, respectively.

Still, Healy said, with a holiday weekend coming up, it may be too early to say what the fallout from May will be.

"Let's wait for June," he said.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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