U.S. auto sales fall sharply in January
Automakers on Tuesday reported dismal January results as U.S. sales for the month fell below those in China for the first time, according to industry estimates.
A total of 656,976 cars and light trucks sold here last month, a 37% decline compared with January 2008, when Americans bought slightly more than 1 million vehicles, according to Autodata Corp. It was the worst sales month since December 1981.
By comparison, consumers in China bought about 790,000 vehicles last month, according to statistics compiled by General Motors Corp. That GM estimate, though, may be conservative: 859,400 vehicles were sold in China in January 2008, and the China Automobile Dealers Assn. says this January’s vehicle sales should be even higher -- thanks in part to subsidies from the government.
It’s a grim indication of just how far the U.S. market, long the world’s largest, has fallen. Last year, overall U.S. sales declined 18% from 2007, and most industry forecasts call for a 20% decline this year compared with 2008.
The sales downturn in the U.S. market has driven Washington to lend Chrysler and GM $17.4 billion to stave off bankruptcy and pushed Toyota Motor Corp. toward reporting its first operating loss in 70 years.
In hopes of reversing the sales slide, the Senate on Tuesday passed an amendment to the $900-billion stimulus bill that would make sales taxes and interest payments on new cars tax-deductible.
The measure, however, is not in the version of the stimulus legislation passed by the House last week.
In January, GM sold 127,243 vehicles in the U.S. -- a 49% decline compared with the same month last year. Toyota, which last year surpassed GM in worldwide sales for the first time, closed the gap on these shores, with 117,287 new-car deliveries, but itself was off 32% from January 2008.
Ford Motor Co., No. 3 in the U.S., saw a 39% decline in January, with 90,131 cars and light trucks sold. Honda Motor Co. sold 71,031 vehicles, a 28% slide, but that was enough to surpass Chrysler, which sold 62,157 vehicles, a 55% decline.
Only three companies showed increases for the month: Kia sales rose 3.5%, Subaru was up 8%, and Hyundai, which has run an aggressive advertising campaign and is even offering to let customers return cars if they lose their jobs, realized a 14% sales gain.
GM shares fell 4 cents to $2.85, Ford rose 8 cents to $1.96, and Toyota’s U.S.-traded shares were up $1.71 to $65.59.
According to Autodata, the industry is on pace to sell 9.6 million cars and trucks this year based on January totals, far below even the depressed levels of the final quarter of 2008 and beneath last year’s total of 13.2 million vehicles sold. A year ago, the annualized selling rate stood at 15.4 million.
“Today we’re in the vortex of the economic downturn, and it’s far too early to talk about recovery,” said Emily Kolinski Morris, Ford’s chief economist. She said a rebound would depend upon improving consumer confidence and a second-half recovery based on a government stimulus package.
GM and Chrysler are to submit turnaround plans to Congress this month, and both have said they would need additional funding to remain afloat. Ford has said it does not need government help but has reserved the right to seek a line of credit from the government.
In response to the crisis, automakers have taken significant strides to cut costs. This week GM and Chrysler made buyout offers worth up to $75,000 to all hourly employees.
The carmakers have been slashing production, but with each new dip in consumer confidence those reductions are rendered insufficient. Ford’s inventory at the end of January was down 27% compared with last year, and GM’s was down 13%. Yet both automakers indicated that further cuts were probably necessary.
GM said January inventories at dealerships stood at 95 to 105 days’ worth of cars and trucks, well above its target of a 75- to 90-day supply. Toyota said its inventory stood at a 77-day supply, 40% above its goal of about 55 days.
“Our inventory is not at optimal levels,” said Bob Carter, vice president of sales at Toyota. “This has been an extremely difficult industry to forecast.”
Excessive inventories force carmakers to offer discounts to keep cars selling. But incentives, rebates and reduced interest rates lower -- if not completely eliminate -- the profit margin on vehicles.
With inventories piling up, automakers have been beefing up incentives in recent months; that means the few sales they are making are less profitable.
Commercial and government fleets are normally a safety valve for the industry, allowing automakers to control burgeoning inventories with quick sales. But those sales dropped off the cliff last month as rental companies such as Hertz and Dollar Thrifty nearly froze acquisitions.
Ford’s fleet sales were down 65%, to 2,000 vehicles, in January compared with a year earlier, the company said, and GM’s were down 80%. Only 1,000 cars sold by GM went to rental fleets, the company said, and Chrysler said its rental fleet sales decreased 91%.
Toyota relies less heavily on fleet sales, which make up only about 10% of its volume even in normal times. Still, its sales were down significantly as interest even in its fuel-saving small cars dried up.
Sales of the tiny Yaris, for example, fell 42% from a year earlier, while the mid-size Camry, Toyota’s most popular vehicle, was down 34%. Honda’s Fit, a rival to the Yaris, showed a modest 6% sales gain.
Ford’s F-Series pickups, the most popular vehicles in the U.S. last year, were down 39% in January, and just two GM models, the Saturn Astra and the Pontiac Vibe, showed year-over-year increases.
A small source of relief for the U.S. automakers has come from their in-house lending arms, which traditionally finance much of their sales. That avenue had withered in the second half of last year as they abandoned leasing and raised credit requirements.
But in the wake of the federal government’s loans to the automakers, including $1.5 billion to Chrysler Financial and $6 billion to GMAC, such lending opened up.
Last month Chrysler began offering no-interest financing deals, along with cash incentives and rebates, and GMAC, which had stopped lending to consumers with a credit score below 700, dropped that limit to 620.
Still, all three U.S. automakers emphasized that more financing flexibility would be essential for a rebound, noting that dealers were still being forced to turn away would-be buyers because they don’t qualify for loans.
“Credit is what’s choking us to death,” said Michael DiGiovanni, chief sales analyst at GM. “Our industry is based on credit more than just about any other.”
Times staff writer Don Lee in Shanghai contributed to this report.