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Update: 'Big Three' Report Decline in June Auto Sales

The decline in auto sales could be attributed to the yearlong interest rate increases and high gas prices.

Updated from 3:53 p.m. EDT

The "Big Three" automakers all reported June sales declines on Monday, indicating that yearlong interest rate increases and high gas prices may have helped calm consumer spending.

For Germany-based




General Motors

(GM) - Get General Motors Company Report

, the decreases followed lower sales in May as well.

Dearborn, Mich.-based

Ford Motor

(F) - Get Ford Motor Company Report

, which makes Ford, Mercury, Lincoln, Jaguar and Volvo vehicles, reported a 2% year-to-year sales drop to 419,932 vehicles in June, following a 1.4% sales increase in May.

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DaimlerChrysler reported a June sales drop of 10% to 215,597 vehicles for its Chrysler Group, which includes Dodge, Chrysler and Jeep vehicles in the U.S., following a year-over-year domestic decrease of 18% in May. June sales of DaimlerChrysler's Mercedez-Benz, which is made in Germany, increased 9% from last June to 17,919 vehicles this year.

Detroit-based GM said its June sales decreased 5% to 472,078 vehicles, following May's decrease of 5.8%. General Motors is the world's largest automaker, producing Chevrolet, Oldsmobile, Cadillac, Buick, Saab and Saturn.

GM's car sales declined 2% to 252,601, and truck sales fell 8% to 219,477. Sales of full-size utility vehicles increased 6%.

David Littmann, chief economist for

Comerica Bank

, called the

Federal Reserve's

interest rate increases the "overriding reason" for the automakers' sales drops. He also said high oil and gasoline prices contributed to the declines, and a stock market that "hasn't behaved as well" as it did in the first quarter also hurt sales.

"I think the Federal Reserve has engineered a slowdown, and that will be with us in the second quarter and third quarter," Littmann said. He added that he expects the fourth quarter to see higher sales as a result of lower oil and gasoline prices and continued income growth, accompanied by low competitive auto prices.

Littmann said "unprecedented" auto sales in the first quarter resulted from payouts of profit sharing and bonuses among automakers and suppliers, a 9% year-over-year increase in tax refunds to households from 1999 taxes and a carryover from monetary stimulation in the fourth quarter of 1999. Stock market prices also increased during the first quarter.

Despite high gas prices, utility vehicles are still popular among Americans, as demonstrated by GM's year-over-year sales success. Littmann said automakers are liquidating their utility vehicle inventories to make room for new introductions and production cutbacks scheduled for the third quarter. "We've seen more competitive discounts and incentives," he said.

Littmann predicted the companies would augment incentives such as rebates and financial discount rates in an effort to boost their sales. He said GM in particular has missed its market share objectives a few times, and "shareholders won't stand for it" again. The company will augment its sales incentives "in order to defensively retain market share," he said, "and that forces the other automakers, including newly competitive sports utility vehicle makers among the Japanese nameplates, to follow suit."

Shares of Ford closed Monday trading up 15/16, or 2%, at 43 15/16. DaimlerChrysler ended up 1, or 2%, at 53 1/16, and GM finished up 9 1/16, or 3%, at 59 5/8.