Thread: Auto Sales Worst Since 1992

Auto Sales Worst Since 1992

Shell-shocked consumers stay away from showrooms. GM sales down by 45%, Ford off 30%, and Toyota 23%



By David Kiley and David Welch

A combination of plunging consumer confidence and shortage of credit is pushing auto sales to their lowest monthly levels since the early 1980s—and the automakers themselves to the financial breaking point.

The U.S. Big Three automakers—General Motors (GM), Ford (F), and Chrysler—reported big double-digit declines in October sales: Ford was down 30%, GM off 45%, and Chrysler down 36%. Edmunds.com says it expects industry sales to be down 29% from a year ago. That would be the lowest level of sales since 1992, though other industry analysts expect a bigger drop to levels not seen since Ronald Reagan was in the White House.

"It was like somebody turned the lights off in October," said GM sales and marketing chief Mark LaNeve. According to GM, October, after adjusting according to sales per capita, was the worst month for sales in the post World War II era. It was worse even than sales in September and October after the September 11 terrorist attacks against New York and Washington in 2001. "In my 27 years in the business, I've never seen a month like this," said an exasperated LaNeve.

The declines aren't limited to U.S. brands. "The carnage was completely widespread," said GM's LaNeve. Toyota (TM), despite huge ad spending and zero-percent financing, reported a sales drop of 23%. Nissan (NSANY) was off 33%. Hyundai was down 31%. Suzuki was down 44%. Luxury makes weren't spared. Mercedes-Benz (DAI) was down 26% and BMW was off 10%.

Lobbying Washington
Research firm Autodata said the annual monthly selling rate for November was 10.5 million units, down 32% from a year ago. That's the number of auto sales there would be for an entire year if every month was as bad as October. In October, 2007, the annualized selling rate was 16.4 million. It's the worst month for auto sales since February 1983, according to Autodata. It is also lower than the worst Wall Street forecast for October.

GM and Ford are both expected to release third-quarter earnings this week. The losses are expected to expose GM and Ford's burning of limited cash reserves to make up for falling revenue and profit. GM was burning about $1 billion per month at the end of the second quarter. But as sales have worsened since the summer, along with the broader meltdown of the equity and credit markets, the burn is expected to be worse for both companies.

Chrysler, which is privately held, does not report its financial results.

The Big Three automakers are aggressively lobbying Congress and the White House for loans to help them get through 2009 and the current recession. Without help, many analysts believe the automakers will run out of money by midyear. Few, however, believe the government won't act to help GM and Ford. GM is trying to acquire Chrysler (BusinessWeek, 10/31/0 LLC in the hopes of cutting enough costs to save the combined automaker.

Ford chief of sales analysis George Pipas says the biggest headwind for Ford is consumer confidence. "There is so much going on, it's just easier for the consumer to stay on the sideline for a while," says Pipas.

Both Cars and Trucks Hit
Some months, and even some quarters, sales favor either cars or trucks depending on gas prices and economic indicators like housing starts. But the pain is being felt throughout automakers' lineups. At Ford, sales of its fuel-efficient Focus were down 18%, and its trucks and SUVs were down 30%. Volvo sales at Ford were down 51%. At GM, trucks and SUVs were down 52% and passenger cars were down 34%.

The absence of credit, U.S. households' historically high credit-card balances, fears of rising unemployment, and depressed housing values, which have helped home-equity credit lines evaporate, are all keeping consumers on the sidelines. "One thing about a new car or truck is that very few people absolutely have to have a new one…most people can keep driving the one they have indefinitely," says marketing consultant Dennis Keene.

U.S. consumer confidence fell to the lowest level on record in October as stocks plunged and banks shut off credit. The Conference Board's confidence index tumbled to 38, less than forecast and the lowest reading since monthly records began in 1967, the New York-based research group said on Oct. 28.

Auto executives say yearend sales will begin this week, with more advertising hawking incentives on the airwaves after the Presidential election is over tomorrow. But what sales the automakers book will set them up for a big hangover in 2009. The first quarter of any year is traditionally the weakest. Industry sales in 2009's first half will be "sobering," says Jim Farley, Ford's worldwide marketing chief.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau. Welch is BusinessWeek's Detroit bureau chief.

http://www.businessweek.com/lifestyle/c ... _top+story

Just wait, it will get worse after Obama doubles the price of gas.

"This Hispanic vote" will probably put Obama over the top. The car companies have given millions to Hispanic groups like LaRaza. Seems like a pretty stupid investment to me, those donations were like a down payment on bankruptcy.