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Email Story to a Friend July 4, 2006 Workers at the Renault factory in Flins, west of Paris, carry parts of a Clio car through the assembly line last week. Renault and Nissan have proposed an alliance with General Motors, whose sales for June compared with last year�s fell 25.7 percent. (Associated Press) Auto sales hit rough spot U.S. companies see losses as gas prices remain high; GM considers alliance with Renault, Nissan By John O'Dell Los Angeles Times U.S. auto sales dropped sharply in June as many motorists apparently remained wary of continued high gasoline prices and waited for a new round of steep discounting that many analysts expect will be launched after the Fourth of July holiday. Toyota Motor Corp. was the one bright spot, continuing its string of monthly sales increases with a 14.4 percent gain from a year earlier. General Motors Corp. posted the industry's biggest decline, as its sales for the month plunged 25.7 percent from its record June 2005, when the company began offering all customers the same discounted prices its employees received. Industrywide, passenger vehicle sales fell 9.7 percent in June and 2.4 percent for the first six months from the comparable periods of 2005. U.S.-based automakers saw their collective sales drop 18.7 percent in June; Asian companies' sales rose 2.8 percent; and European brands, including those affiliated with American automakers, posted a 0.5 percent gain. Still, with interest rates rising and fuel prices hovering near $3 a gallon, "it wasn't a bad month and it's not a bad market," said Jesse Toprak, an analyst at automotive information service Edmunds.com in Santa Monica, Calif. Advertisement Even at GM, despite its big June decline, there are signs of life as most of the new cars and trucks it has launched in the last year, including full-size sport utility vehicles, posted sales gains, Toprak said. Those small pluses could be a factor in GM's ultimate response to overtures from Renault of France and Nissan Motor Co. of Japan to join their alliance. The resulting global giant would produce more than 15 million vehicles a year, or about a quarter of all new cars and trucks sold worldwide. GM is struggling to recover from a $10.6-billion loss last year fueled by falling sales, high operating expenses and soaring costs of raw materials and employee and retiree health care. Still, any signs that GM is making headway with the recovery plan launched last year by Chief Executive Rick Wagoner could stiffen the automaker's resolve to go it alone. And Nissan itself is losing ground in the U.S. after two years of hefty sales gains. GM said Friday that its board would consider the proposal — floated early that day by Los Angeles investor Kirk Kerkorian, who holds a 9.9 percent stake in GM — that Renault and Nissan collectively acquire a significant minority stake in the American automaker. GM had issued no further comment through Monday evening, but the boards of the French and Japanese companies said earlier in the day that they wanted to proceed if GM was willing. Renault owns a controlling 44 percent stake in Nissan, and the companies share a chief executive, Carlos Ghosn, celebrated in the auto industry for moving Nissan from the brink of insolvency to record profit in two years. Analysts have been divided in assessing the potential of a GM-Renault-Nissan alliance, some suggesting that GM's U.S. operations, where its problems are concentrated, would see little benefit. Nissan, now in the third phase of the turnaround begun in 1999, trails Japanese rivals Toyota and Honda Motor Co. in overall fuel efficiency and has been hurt recently by the recall of 97,000 of it popular Altima and Sentra sedans because of potential engine fires. The automaker's U.S. sales dropped 19 percent in June from a year earlier and are down 5.7 percent for the first six months of 2006. Others believe that by joining forces, GM, Renault and Nissan could further pare parts and raw material costs through economies of scale and could help one another by sharing engineering, research and design resources. Nissan's present problems, Edmunds analyst Toprak said, "are temporary, and the designs that helped it recover could help GM as well." On the sales front, June's story was in the continuing strength of Toyota. The company, No. 3 for the month behind GM and Ford Motor Co., was bolstered by its fuel-efficient small cars and gasoline-electric hybrids, notably the popular Prius sedan. Toyota also benefited from the continuing market shift from large trucks and truck-based sport utility vehicles to so-called crossovers — sport wagons and SUVs built on car platforms for improved handling and fuel economy at the expense of ruggedness. Toyota was up 9.8 percent for the first six months, with June sales helped by its redesigned Camry sedan and the new Yaris subcompact. Toyota has surpassed Chrysler Group in sales for four consecutive months and holds a 14.6 percent U.S. market share for the first half of the year, compared with Chrysler's 13.5 percent. GM continued to lead in market share, 24.1 percent for the first half, with Ford in second place at 17.3 percent, followed by Toyota, Chrysler and Honda at 8.9 percent. 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