Crash, Uncertainty Blamed as U.S. Car Sales Decline 12%

Buyers remained hesitant about plunking down thousands of dollars for a new automobile in mid-November as sales of U.S.-built cars dropped 12% from the year before.

In all, the nation’s eight major auto manufacturers reported on Tuesday that they sold 172,552 cars from Nov. 11 to Nov. 20. Industry leader General Motors reported the biggest drop: 18%. Chrysler sales decreased 7.7%, and Ford sales were flat, declining 1.6%.

“It appears that consumer confidence is down, and consumer spending is reflected in the auto sales numbers,” said Cynthia Certo, an auto analyst with Integrated Automotive Resources.

She said the consulting firm had lowered its projections for auto sales this year. “We’re dropping our previous forecast in light of the stock market crash, and in light of a tax increase for 1988,” she said. If Congress approves a tax increase, she added, “it will certainly bring down consumer spending.”

“The auto market has weakened a little bit,” said Thomas Sullivan, an automotive analyst with WEFA Group. “Over the first three years after the economic recovery (of 1983), the pent-up demand was satisfied.”

Sullivan attributed some of the sluggish auto sales to the stock market crash, which has given consumers a “wait and see attitude,” and to weakness of the economy in general.

Waiting for Incentives

In addition, he noted that consumers still seem to be waiting for more incentive programs. “Why would any consumer go out and buy with no incentives?”

Sullivan believes that recently implemented incentives, such as a reduction in the base price for many Chrysler models, are not as visible as the last round of incentive programs, which reduced the annual interest rates on car loans.

Although car sales were down in mid-November, the combined domestic car and light truck sales fell only 2.1% in mid-November from a year ago.

There were also decreased sales reported by foreign automotive companies that are manufacturing domestic autos. Honda’s sales dropped 22.2%; Volkswagen’s sales dropped 29.2% and Nissan’s sales dropped 47.5%.

Mazda and Toyota, which recently started automotive production at U.S. facilities, sold 165 and 656 new domestic autos, respectively.

David Healy, an auto analyst with Drexel Burnham Lambert, said: “I think mid-November sales were kind of mediocre.” But he was unwilling to single out recent economic events as the cause. “They were about what I would have expected in the absence of the stock market crash or a weak economy,” he said.

Healy explained that the auto industry is being affected by the ending of auto sales incentives at the beginning of October. He added that last year’s higher mid-November sales were already beginning to be affected by the expiration of the sales tax deduction at the end of 1986.

“Year to year sales comparisons are beginning to get a little more difficult,” Healy said. “The overall decline of automotive sales this year is due to market saturation.”

“After the stock market crashed, we had a little lull” said Michael Carr, operations manager at Midway Ford in West Los Angeles. “Consumers are worried about the same old things--the price and the payments--but (overall) sales have been relatively the same.”

Sales of some Ford models, however, have been “outstanding,” he said. “The hot seller out here is the Mustang, especially the convertible. We sell them as fast as we get them. . . . We had somebody walk up as they were coming off the truck” and try to buy one.

“I believe, in my case, (sales) have slowed down a little bit,” said Bruce Meyers, a sales manager for Bill Murphy Buick of Culver City. “The addition of the new 1988 Buick Regal has made a large difference in our sales. . . . It has compensated for the total decrease in sales. . . . (We don’t have) the normal flow of customer traffic that we normally have.”

“The public is so saturated with finance programs,” Meyers added. “General Motors should stop them completely, and maybe things would settle down. It would give the public a fair chance to do what they want to do. . . . People who would normally buy a car must wait until the (next incentive) program to buy.”

AUTO SALES

Nov. 11-20 Nov. 11-20 % 10-Day 1987 1986 change GM 80,628 98,306 -18.0 Ford 54,442 55,331 -1.6 Chrysler 26,484 28,689 -7.7 Honda U.S. 6,676 8,579 -22.2 VW U.S. 1,149 1,625 -29.2 Nissan U.S. 1,505 2,869 -47.5 Toyota U.S. 1,505 760 +98.0 MazdaU.S.* 163 -- -- TOTAL 172,552 196,159 -12.0

*No comparable year-ago sales.