U.S. auto sales drop 37% to another low

U.S. auto sales drop 37% to another low

Chrissie Thompson Automotive News February 3, 2009 - 12:20 pm ET UPDATED: 2/3/09 7:00 p.m. ET

U.S. auto sales dropped 37.1 percent in January, dragged down by the Detroit 3, as the industry posted its lowest monthly total in 27 years.

Ford Motor Co.'s 41.6 percent fall and General Motors' 49 percent drop were steeper than analysts' forecasts. Chrysler tumbled more than 50 percent for the second straight month. Honda, Nissan and Toyota all slipped more than 27 percent, cementing the industry's fourth straight monthly slide of more than 30 percent.

The annual selling rate of 9.8 million units matched a rate last seen in August 1982. The sales total of 656,881 vehicles was the lowest since December 1981 and marked the 15th-straight monthly decline. The credit crunch is stifling sales, said John Broderick, general manager of Burlington Automotive's Chevrolet store in Burlington, N.J.

"Financing is very difficult. It's the toughest I've ever seen," he said.

Last autumn, GMAC Financial Services effectively stopped consumer lending, requiring credit applicants to have prime credit scores. The GM-exclusive lender loosened restrictions in December, but said today it financed just 5,000 purchases in January. Only one of those deals was from Broderick's store.

GM today responded by initiating a round of incentives that includes 0 percent financing and higher rebates. The program covers some of GM's best-selling vehicles, including the Chevrolet Malibu. Hyundai, Subaru gain

Only two companies gained: Hyundai-Kia and Subaru. Each saw sales rise about 8 percent. Subaru was the only automaker to record an increase in U.S. sales last year.

Hyundai brand sales rose 12.5 percent after the debut of the Hyundai Assurance Program Jan. 2. The plan allows customers who lose their jobs within a year of their purchase to return their new vehicles at no cost if they've made two payments.

"Buyers are very loyal to the Asian brands, but they're also very price sensitive, and they might be considering Hyundai or Kia over Toyota or Honda," said Jesse Toprak, executive director of industry analysis for auto information site Edmunds.com.

The industry's January results reinforce projections that any recovery won't happen before midyear. The also heighten the challenges for GM and Chrysler.

The two companies are preparing viability plans for the U.S. Treasury Department in order to preserve the $13.4 billion in federal loans they have already received.

Ford is trying to continue operations without federal aid, despite burning through $5.5 billion in cash last quarter.

Last year's light-vehicle sales dropped to 13.2 million, as soaring fuel prices in the first part of the year and a global credit crunch later in the year deepened a national recession. The annual sales rate peaked at 15.6 million in January and skidded to 10.4 million in December.

In 2007, 16.1 million light vehicles were sold in the United States.

Fleet factor

The biggest reasons for the decline in last month's sales rate was the fleet market, said Ford sales analyst George Pipas. "We estimate the industry fleet sales were down 65 or more percent from a year ago."

Ford said its sales to individual customers fell 27 percent. The two-thirds drop in fleet includes a 90 percent decline in sales to rental companies.

Ford's re-engineered F-150 pickup gained retail market share in January, the automaker said. But total F-series sales fell 38.6 percent in January.

January fleet sales fell partly because of U.S. automakers' extended plant shutdowns after the year-end holidays, analysts say. In addition, some corporations took advantage of GM's December fleet incentives. The industry started 2009 with a 94-day supply of vehicles, more than

50 percent above the level recommended by analysts.

Wary consumers crimped sales at Jim Arrigo's Dodge-Chrysler-Jeep store in West Palm Beach, Fla. Arrigo sold 160 new vehicles in January, down from 325 last year.

"They're not even sure if they'll have a job tomorrow,'' Arrigo said. "They're scared to death about buying something."

The Conference Board, a market information group, said last week its

42-year-old survey of consumer confidence slid to record lows in December and January.

Bob Carter, head of Toyota Division, said he doesn't anticipate any rebound in the market until the second half of the year.

"There were no surprises in January for the industry and the segments," he said. "The market turned out the way we anticipated."

Jamie LaReau, Amy Wilson and Kathy Jackson contributed to this report.

Reply to
C. E. White
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I little back-up - Ford's decline includes the the loss of Jaguar and Land Rover (they were counted in the 2008 totals, not counted in

2009). This inflates Ford decrease by about 3%. If you just look at Ford / Lincoln / Mercury sales, the decrease is about 39%.

Toyota did the worst of the Japanese companies with a 31.7% decline. Not sure why the article spelled out the Ford and GM declines, and then just said all the big Japanese companies declines by more than

27%. It seems like they should have highlighted them individually as well (Honda down 27.9%, Nissan down 29.7%).

......

I thought all the US companies were trying to eliminate "no-profit" fleet sales. It seems they were successful.

Not a big surprise.

Ed

Reply to
C. E. White

Honda stated last year that they were not concerned about competition from Detroit, but were concerned about the Chinese.

Imagine the chinese market, 1.6B people, growing middle class at about 400M starting to buy cars. One cannot help but to know China, while in it's infacy as an automaker is going to grow up real fast. And yes, Chinese have automakers we don't see on the sales charts yet. They will have volume and costs in their favor. Once their market is saturated, they will eye exports to the US and Canada.

I would say if a high cost north American automakers (any company) wants to survive they had better get well run and profitable very fast or else they will just be dead bugs caught in the wake. In the new economy, people are not going to pay 25, 30, 35, 40+ for a middle class automobile. Try $15K.

Reply to
Canuck57

Interesting you should mention the Chinese. I just saw a new article stating that for January, the world largest car market was China, NOT the US. And, GM actually does fairly well in China.....so maybe GM should just shut down the US operation and become CM.....

Ed

Reply to
C. E. White

That happens when you spend more than you earn as an economy. Part of this whole excercise is to reduce this effect, and China does not need more USD on deposit from trade, with over $1.5T in USD cash. Last year when China cashed some of the cash they had to buy resource companies, it caused the USD to drop.

While most people play up the costs of gasoline, much of it was due to the weak USD.

Reply to
Canuck57

Where do folks get the idea fleet sales are not profitable? Every manufacture, including import brands, sells to fleets. The industry fleet discount averages around $800 for all manufactures.

Plant shut downs makes sense as the reason for lost fleet sales. Fleets buy early on in the model year, not at the end of the model year.

A sale is a sale, why would any manufacture NOT want to sell to a buyer that buys in volume?

Reply to
Mike Hunter

Fleet sales are not "no profit" sales. They are at a lesser profit than consumer sales, but at a higher volume. Nothing unusual about that formula.

Reply to
Mike Marlow

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