U.S. Car Sales Decline 8.7% in September
The major U.S. auto makers confirmed Tuesday that sales fell sharply in the aftermath of the terrorist attacks but reported signs of stabilizing consumer confidence in the last 10 days.
Industrywide U.S. sales of new passenger cars and light trucks--hit by a double whammy of worsening unemployment and consumer confidence, and then a plunge after the terrorist attacks on the East Coast--fell about 8.7% in September, according to Autodata Corp.
General Motors Corp. posted a 2.8% drop for the month, Ford Motor Co. sales declined 9.9%, and DaimlerChrysler’s Chrysler Group plunged 27.9% from last September.
But the companies said their sales recovered in the last 10 days of the month to levels comparable to those of a year earlier, when the industry set an all-time record, indicating that consumer confidence has bounced back quickly thanks to generous incentive programs and President Bush’s call to Americans to get back to their spending habits.
Import brands reported mixed results, with sales at BMW and Hyundai up for September but Toyota, Honda, Nissan, Volkswagen and its Audi brand and Daimler unit Mercedes-Benz joining the traditional U.S. Big Three in declining.
Auto sales--one of the first monthly economic indicators to come out since the attacks and an important barometer of consumer sentiment--nevertheless will recover rapidly and produce the third- and fourth-best years ever in 2001 and 2002, said David Littmann, chief economist for Comerica Bank in Detroit.
“The economy’s fundamentals remain strong: Incomes and home prices are up 4% to 5%, and purchasing power and demographics are favorable to the auto industry and will be for the next two years,” Littmann said. “There will be a very nice economic resurgence over the next year; there’s still no recession in my forecast.”
Diane Swonk, senior economist at Bank One Corp. in Chicago, remains more bearish, saying that conditions will get worse yet but recover by next spring.
The economy is headed into an “atypical, event-triggered recession” of a likely couple of quarters of negative growth accompanied by the loss of 100,000 airline jobs almost overnight, plummeting hotel occupancy and a blindsiding of the tourism industry, she said.
“It’s a ripple effect, but the good news is that ripples dissipate. As long as we do not have a major event”--such as another terrorist attack on the U.S.--”then we will bounce out of it,” Swonk said. “By the second quarter, we’ll be back to robust growth.”
U.S. sales of new cars and light trucks are expected to finish the year at 16.7 million, the third-best year after 1999 and 2000, said Paul Ballew, GM’s director for market and industry analysis. Like many others in the industry, he has lowered his forecast for next year, in this case from nearly 16 million to somewhat above 15 million.
For the first three quarters of the year, industrywide U.S. sales totaled 12.81 million, off 5.3% from last year’s record pace.
GM, No. 1 in U.S. and global sales, attributed its comparatively strong September performance to aggressive incentives to get customers back into showrooms. Its “Keep America Rolling” campaign offers zero-percent or low-interest financing on most 2001 or 2002 models.
Following a trend of recent months, GM’s truck sales were particularly strong, with its sport-utility vehicles in every category setting sales records for September, the third quarter and year to date.
GM is funding the new incentives by canceling or delaying other incentive programs, Ballew said, so even though the company is in effect eating the cost of the cheap loans, “this marketing program is not breaking the bank.”
For Ford, “ ‘roller coaster’ would appear to be an appropriate metaphor for September,” said George Pipas, the No. 2 auto maker’s director of sales analysis.
He said Ford could not measure the effect on sales of the terrorist attacks and has not tried to calculate the influence of its new incentives, which match GM’s.
But the continuing monetary stimulus by the government, including another half-point cut in interest rates by the Federal Reserve on Tuesday, will help prod new-vehicle sales and the economy in general, Ford economist Jarlath Costello said.
The auto maker stuck to its warning, however, that third-quarter results would fall below a loss of 10 cents per share, announced by Ford three days after the airliner attacks.
Chrysler Group also matched GM’s financing incentives, but it was not enough to stem the slide in Chrysler, Dodge and Jeep vehicles, especially large sedans and minivans. The company said it will cut production by 26,000 vehicles in October by closing five plants for one to three weeks to clear out the inventory buildup caused by reduced customer traffic in September.
“These are extraordinary times, and there is no doubt that our sales were affected by the tragic events of Sept. 11, primarily because this country’s focus has been justifiably elsewhere,” said Gary Dilts, senior vice president for sales. “In addition, we are comparing ourselves against a record month last year, when we were deeply discounting older models.”
Sales to rental fleets were hit hard because of drastic declines in the number of airline passengers. Business at Hertz, a wholly-owned subsidiary of Ford, was down more than 30% in the second half of September.
BMW was one of the few auto makers reporting an increase in September, rising 8.7% from a year earlier. The German brand also recorded a 19.2% increase in year-to-date sales. Toyota’s Lexus division was down 8.8% in September but remained up slightly for the year, keeping it in the No. 1 position for luxury brands, just ahead of BMW.
Toyota-brand vehicles were off 4.2%, as were sales at Japanese rivals Honda (3.8%) and Nissan (18.5%) and its Infiniti luxury line (25.4%). Volkswagen sales sank 15.4% and Mercedes-Benz sales were off 4.8%.
Hyundai of South Korea saw a 50.2% increase in sales, crediting its 10-year powertrain warranty and a growing reputation for providing value for the price.
