Chrysler LLC and General Motors Corp., operating with $24.9 billion in U.S. support, may have led national auto sales to a fourth month of 30 percent decreases and a pace not seen since the recession of the early 1980s.
Sales fell 49 percent at Chrysler in January from a year earlier, 39 percent at GM, and 33 percent at Ford Motor Co., based on the average estimates of eight analysts surveyed by Bloomberg. Toyota Motor Corp. may report a 30 percent drop, Honda Motor Co. could slip 26 percent, and Nissan Motor Corp. may fall 33 percent, according to four analysts.
The drop would mark the 14th month of declining sales, amid low consumer confidence and more than a quarter-million job cuts at companies from Starbucks Corp. to Caterpillar Inc. Car-rental companies, government agencies and other bulk customers also may have cut their purchases in half last month amid the deep recession, said Jesse Toprak, director of industry analysis for auto-research firm Edmunds.com in Santa Monica, California.
“Until we see stabilization in the housing market and job market we’re not going to see a real rebound in car sales,” Toprak said.
Automakers may report Feb. 3 new vehicles sold at a seasonally adjusted annualized rate annualized rate of 10.2 million units, according to the average estimate of 30 analysts and economists surveyed by Bloomberg. In October, the sales rate was 10.6 million, the lowest rate since February 1983, according to Autodata Corp. of Woodcliff Lake, New Jersey.
Testing the Bottom
A rate in January of 10.3 million, the average of nine industry analysts’ estimates, would equal the pace in December, after November’s sales rate of 10.2 million, the lowest for a month in 26 years. If that happens, it may signal the industry has seen its lowest monthly rate, said Jeff Schuster, head of global forecasting with consulting firm J.D. Power & Associates.
“We may be at the bottom of things and starting to at least see some stability,” he said. “Anyone in this industry will take a level of stability, even if it’s at a low level.”
If the selling rate stays the same or rises in February, “we can call a bottom, albeit at a very low rate,” said Toprak.
Last year, sales of light trucks and cars fell 18 percent to 13.2 million units. That drop contributed to GM and Chrysler seeking federal loans to stay in business. This month both companies will be presenting an update on their restructuring plans to try and secure more funding.
Ripple Effects
The sales declines and ensuing production cuts also hurt businesses that supply car companies, and a trade group that represents partsmakers is working with the U.S. Treasury Department this week on potential aid plans, said Neil De Koker, president of the Original Equipment Suppliers Association. The group may ask for as much as $10 billion in assistance, he said, stressing that group has not settled on its proposal.
Without aid, dozens or even hundreds of suppliers could fail in the coming months, analysts said, which would shut down assembly plants and the rest of the supply base.
Idle car and truck plants in December and January also cut the supply of vehicles to so-called fleet customers, said Toprak and automaker officials.
“Fleet sales typically are deliveries that are immediate, and with the plant shutdowns you’re not building and so you’re not delivering,” GM spokesman John McDonald said.
Fleet sales accounted for 2.6 million of the 13.2 million cars and light trucks sold last year, according to J.D. Power, down from 3.3 million of the 16.1 million vehicles sold in 2007.
Credit Still Tight
A lack of credit has pinched both fleet and retail buyers, said George Pipas, a sales analyst at the Dearborn, Michigan- based carmaker. In an attempt to loosen credit for buyers the Treasury Department provided a $6 billion bailout to GMAC LLC, the lender affiliated with GM, and $1.5 billion in loans to Chrysler Financial.
Those loans haven’t yet reached the market, said Mike Jackson, chief executive officer of AutoNation Inc., the largest publicly traded U.S. car retailer.
“The banks say no, they simply don’t have credit,” he said.
Before Sept. 15, about 95 percent of Fort Lauderdale, Florida-based AutoNation’s customers with prime credit were granted loans, Jackson said. That level has since dropped to about 59 percent.
If job losses continue to mount in the U.S., that will also likely hinder a rebound in sales, said Schuster, the J.D. Power forecaster.
“No one who just lost a job will be in the market for a new vehicle,” he said.
+ Jan. 2009 Auto Sales: Japan Sales Plunge to Lowest in 37 Years
+ Jan. 2009 Auto Sales: French Car Sales Drop Further
+ Dec.2008 Auto Sales: GM,Ford,Honda,Toyota Drag 36% decline
+ Dec.2008 Auto Sales: GM U.S. Sales Drop 31%
+ Dec.2008 Auto Sales: Honda U.S. Drop 34.7%
Eroding Confidence
The number of Americans receiving unemployment benefits reached 4.78 million in the week ended Jan. 17, the highest since record-keeping started in 1967, the Labor Department said Jan. 29.
Low consumer confidence has taken its toll on U.S.-based automakers.
GM, Ford and Chrysler saw their market share fall below 50 percent for the first time in the U.S. last year because of competition from companies based overseas. Ford is the only of the three that may increase market share slightly in January to 15 percent, Toprak said.
Toyota City, Japan-based Toyota’s market share may be about 8 percent in January, up from 17 percent last year, he said. Honda may also rise to 10 percent from 9.4 percent last year.
GM fell 17 cents, or 5.3 percent, to $3.01 in New York Stock Exchange composite trading on Jan. 30. The shares have slid 90 percent in the past 12 months. Ford fell 8 cents, or 4.1 percent, to $1.87, sliding 73 percent in the past 12 months.
GM’s 8.375 percent notes due in July 2033 rose 0.25 cent to 14.75 cents on the dollar, yielding 56.6 percent, according to Trace, the bond-price service of the Financial Industry Regulatory Authority.
Ford’s 7.45 percent notes due in July 2031 fell 1.25 cent to 21.5 cents on the dollar, yielding 34.7 percent.
The following table provides estimates for car and light- truck sales in the U.S. Estimates for companies are percentage changes from January 2007. Forecasts for the seasonally adjusted annual rate, or SAAR, are in millions of vehicles.
The SAAR average is based on forecasts from 9 analysts and a survey of 30 economists. The estimates are based on daily selling rates. January had 26 selling days, one more than in 2007.
