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November auto sales sink to worst level since 1982

Tuesday, December 2, 2008 | 10:35 p.m. CST; updated 12:44 a.m. CST, Wednesday, December 3, 2008

NEW YORK — U.S. auto sales plunged 37 percent in November to their worst level in more than 26 years, dashing expectations that this dismal year for vehicle demand had found a bottom, and adding more ammunition to the Detroit automakers' case for a congressional lifeline.

Every major automaker reported a year-over-year sales decline of more than 30 percent on Tuesday. The Detroit carmakers were among the worst hit, with GM's U.S. sales falling 41 percent and Chrysler LLC's dropping 47 percent.

Their overseas rivals posted abysmal results as well. Toyota's sales tumbled 34 percent, while Nissan's dropped 42 percent and Honda's fell 32 percent.

"Our industry is in a much more severe situation than the rest of the economy," said Mike DiGiovanni, General Motors Corp.'s executive director of global market and industry analysis. "We cannot continue at these levels or else the entire industry is going to go down."

U.S. auto sales in November fell to 746,789, according to Autodata Corp. On a seasonally adjusted basis, automakers reported an annual sales rate of 10.2 million units, the lowest level since October 1982.

Automakers and analysts blamed the crumbling economy, less access to vehicle financing and a wait-and-see approach among consumers more preoccupied with the value of their homes and the fate of their jobs than the lure of a new car.

"Consumers (are) not showing up at the dealerships — regardless of the deals they're being offered and regardless of how low the gas prices go," said Jesse Toprak, executive director of industry analysis for the automotive Web site Edmunds.com.

The dreary reports came the same day the Detroit Three sent reports to Congress detailing why they are worthy of billions of dollars in emergency loans.

GM said it needs $4 billion this month and a total of $12 billion by late March to keep operating, while Chrysler is asking for $7 billion by year's end. Ford Motor Co. wants a $9 billion standby line of credit, though it has said it has enough cash to get through 2009 and may not have to touch the government's money.

Few analysts expected November's sales numbers to be quite so low, predicting lower gas prices and higher incentive spending by automakers eager to make deals would put a floor under sales. Incentive spending rose 15.2 percent from last November, according to Edmunds, while gas prices have plunged by more than half from their all-time highs this summer.

But those factors did little to bring nervous consumers into showrooms. Jim Farley, Ford's group vice president of marketing, said he expects the industry to post continued year-over-year sales declines until at least the second half of 2009.

"We could see some strengthening in the second half of next year, or at least some stabilization, albeit at a much lower level," Farley said in a conference call with analysts and reporters.

Despite its 31 percent drop in November sales, Ford's market share grew 1 percentage point, helped by a recovery in its pickup truck segment and demand for the Ford Fusion sedan. Sales of Ford's top-selling F-Series pickups dropped 19 percent, significantly less than most of the automaker's models.

George Pipas, the automaker's top sales analyst, said with gas prices falling, the company will increase the proportion of its truck production early next year.

"In effect, right now we need more trucks and we need fewer cars and crossovers," Pipas said.

Toyota Motor Corp., Japan's No. 1 automaker, said truck sales plummeted 36 percent, while demand for passenger cars fell 32 percent, despite the automaker's extension of zero-percent financing on a dozen vehicles.

Toyota said Tuesday that it would extend the zero percent financing offer into December, although it will be up to regional dealers to promote the deals. Nationally, the company said it will focus its advertising on new models, such as the Venza crossover.

Toyota officials said they expect short-term sales to be down, but the introduction of the Venza and a new Prius model may boost sales in early 2009.

"While we're getting our fair share of the industry's sales, we're feeling the effects," said Brian Smith, vice president of Lexus sales and dealer development. "Quite frankly, we're interested in anything that improves consumer confidence in the industry."

GM was more downbeat. Mark LaNeve, GM's vice president for North American sales, service and marketing, said the company did "zero leasing" in November. He acknowledged that the media coverage of the proposed auto industry bailout likely had a negative affect on sales, though he said it was difficult to quantify.

GM went to great lengths in a conference call to portray its declines as a product of the broader economic weakness. The company has said its survival is in question if it does not get a federal lifeline.

LaNeve said the company is focused on getting loans from the government and does not have a plan to operate under bankruptcy. GM has said bankruptcy would decimate sales because consumers would not buy cars from an automaker that might not outlast their vehicle.

"We're not working on any plan around bankruptcy," he said. "We're working on self help and trying to get assistance in terms of loan guarantees from Washington. There's not a plan dealing with bankruptcy in the company that I know of."

Edmunds' Toprak said there were some bright spots in November. There were two fewer sales days compared with October, which made the month-to-month decline more pronounced. In the meantime, the sluggish sales are creating pent-up demand that will likely boost sales once consumer confidence returns.

"Consumers don't want to make a big-ticket item purchase, and cars are obviously the second-biggest purchase they make after their homes," he said. "They're simply waiting for the dust to settle."

 


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Comments

Ayn Rand December 3, 2008 | 12:33 p.m.

Another reason why people aren't buying cars is because for the past several years, it was ridiculously cheap (e.g., 0% financing) and easy to buy one. So unless you're one of those fools who has to have a new car every year or two, you won't be shopping for at least a few more years.

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