U.S. auto sales hit the skids
Auto industry leaders, stung from one of their sharpest dives in monthly U.S. sales, hope the pending $700-billion bailout package will restore public confidence in the nation’s financial system and, in turn, resuscitate their ailing operations.
In releasing September sales numbers Wednesday that fell as much as 36.8%, executives at General Motors Corp., Toyota Motor Corp., Ford Motor Co. and Chrysler said that passing the bailout bill should help housing and consumer spending eventually get back on track.
“If the bill helps restore consumer confidence, let’s hurry up and make it happen,” said Don Esmond, Toyota’s senior vice president for automotive operations.
The industry, which gained $25 billion in taxpayer-subsidized loans under a broader measure President Bush signed Tuesday, reported is biggest percentage drop in monthly sales in 17 years.
Toyota, Chrysler, Ford and Nissan Motor Co. reported U.S. sales declines of more than 30% for the month compared with September 2007, while Honda Motor Co. and General Motors Corp. showed sharp downturns as well.
Overall, the industry sold only 964,873 vehicles -- a 26.6% slide from a year earlier and its biggest percentage drop in 17 years, Autodata Corp. said Wednesday.
Industry executives blamed public unwillingness to make purchases amid the nation’s financial troubles, as well as a lack of credit from lenders.
“It’s tantamount, really, to a natural disaster,” said George Pipas, chief sales analyst at Ford. Showroom traffic, he added, was at levels associated with “a large storm or the aftermath of 9/11.”
According to CNW Marketing Research, visits to auto dealerships in the last 10 days of September declined 51% compared with the same period last year, the largest slide in at least 22 years.
Toyota’s U.S. sales last month were down 32.3% from the year-earlier period, while Ford declined 33.7%, Nissan slipped 36.8% and Honda fell 24%. Since January, Toyota’s sales are down 10.4%, while Ford’s have fallen 17.1%. Maserati and Bentley were the only makers to post gains in September.
Until last month, Honda had been one of the few carmakers to show a net gain on the year, but declines in August and September have now sucked it down to an overall 1.1% downturn through the first three quarters. Truck- and SUV-heavy Chrysler saw a 32.8% decline for the period, and is off 25% on the year.
GM had a relatively modest 15.5% decline, provoking a near celebratory response from the nation’s largest automaker.
“A few months ago, I’d have jumped out the window with these kinds of numbers,” said Mark LaNeve, head of sales and marketing for GM. “We’re in a kind of crazy market now.”
This has been a very difficult year for carmakers, with industry sales down 12.8% across the board since January. In September, manufacturers were on pace to sell 12.5 million vehicles for the year, far below last year’s total of 16.1 million, according to Autodata.
Consumer confidence has been sliding since last year, and carmakers were hammered by soaring gas prices in the spring and early summer. Lately, dealers complain that customers are being turned away because banks won’t approve loans for anyone without near-perfect credit.
A salesman at Allen Gwynn Chevrolet in Glendale said he was forced to turn away a customer who wanted to buy a Corvette this week despite a relatively high credit score.
“We’re losing about three customers a day because of lack of credit,” said Pogos Yenkanyan, team manager for new car sales at Allen Gwynn. “That adds up to 100 cars a month.”
He and others pointed to the demise of leasing -- which has essentially come to a halt for many manufacturers -- as another factor.
Chrysler abandoned leasing as of Aug. 1, while Ford and GM have greatly increased the cost of such programs. GM said Wednesday that only 1% of its business in September was leases, far below a historical average closer to 20%.
Nerses Nersisyan, a salesman at Star Chrysler Jeep in Glendale, said most of his customers preferred leasing -- and that’s not good for him.
He said a lease from an outside bank on a Chrysler Sebring, for example, costs $400 a month, while Mazda offers a $249 lease rate on its Mazda6.
“My customers have a budget,” Nersisyan said. “If I don’t make the budget, they go to somebody who does.”
This year’s challenging conditions have made for a dramatically different selling environment. A prime example is Ford, which can no longer rely upon easy financing and generous lease terms to move the high-end, high-profit vehicles -- such as the $31,000-and-up Expedition sport utility vehicle -- that it specializes in.
In September, only one high-volume Ford model, the compact Focus, showed a sales increase; it was up 4.7%. Expensive gas-guzzlers such as the Expedition, Explorer and F-150 pickup were down 37.4%, 67.3% and 41.6%, respectively.
Toyota, which still offers leasing and specializes in lower-priced vehicles, is doing little better. The Japanese carmaker boosted production of models such as the Corolla to meet soaring consumer demand in the early summer. Yet in September, deliveries of the Corolla were down 27.9%.
Toyota’s Esmond said that wasn’t due to a lack of credit; rather, it was because nobody was even making offers. The Wall Street crisis “certainly put the brake on consumers,” he said. “We had people calling to ask for their deposits back on Lexus orders.”
GM said its third-quarter sales topped both the first- and second-quarter results, even as its supply of cars, year over year, has dropped by almost half a million units. But Michael DiGiovanni, GM’s top sales analyst, said that inventory control and dealer incentives -- such as the two months of employee pricing GM offered through Tuesday -- weren’t enough to drive business.
“Everything is just compounded at once,” said Jessica Caldwell, an auto industry analyst at Edmunds. “This is about people not wanting to spend the money right now.”