I'm sure that had a bearing on it but the reasons runn much deeper, ever since the haydays of the late 70's when Smokey and the Bandit shot Trans Am sales to all time highs they have been dropping. And it was not only GM that had this problem, in the early 90's Ford was actually considering dropping the Mustang due to such low sales performance, the replacement was eventually produced the 4 cylinder fwd Ford Probe, but due to public complaints the Mustang servived. Moving on thru the 90's into the Naughties sales where once again struggling, largly due to the explosion of performance pick ups and SUVs and increased compition from foriegn car makers such as BMW, Porsche and so on.
Both the Fbody and Mustang where using very old technology which was far behind the modern competition technically wise and where becoming un-economical to continue to develop. GM had no new platform to look at, at the time and decided that at the current sales rate it was not a viable market in invest in a new model. The 4th Gen Fbody had reached its pinicle of development, there was little left to be done without a whole redesign so it was axed.
Ford faced the same problem with the sn95, its sell by date had expired some 20 years earlier and they too had reached the end of the line. I would guess there was serious consideration of dumping the model but 3 factors probably changed it.
1. The SUV and pick up bubble appears to have burst recently and sales of performance coupes are once again picking up (although these figures are influenced by one other major factor which I will get on to in a min)
2. The Jaguar X-Type development and associated models (Mondeo, Lincoln LS). This gave Ford a whole new platform that was the correct size for a new Mustang without the cost of developing a whole new platform for it.
3. As GM axed the FBody this undeniable inflated Mustang sales. If in 2003 you wanted a new American V8 performance coupe there was but one choice, the Mustang. Had Ford folded 1st and axed the Mustang then I'm sure the Fbody would have survived by the same means.
GM did relise there error, which is apparant by the sudden release of a large rebadged Australian coupe called the Monaro. You know it as the GTO. It may not have been ideal to compete against the Mustang but at the time it was all GM had, and cost next to nothing to put into production. Although it may not sell in the numbers of the Mustang it was never intended too and is mearly a stop cap until a new model is ready for release.
The Fbody in one shape or another will return as GM can not afford to be selling in this now lucrative market.