Auto Sales

US auto sales go from bad to worse

The slide in US auto sales accelerated in January as tight credit and consumer pessimism drove sales to the lowest levels in decades, company reports showed yesterday. Yet analysis said the slump was not as dramatic as the figures suggest, since many automakers shutdown plants in January and virtually stopped deliveries to rental fleets.

Preliminary estimated from market research firm Autodata showed a 37 percent drop in January sales from a year earlier to 656,976 vehicles. That represented a seasonally adjusted annual rate of 9.57 million, the lowest since June 1982. The level of sales was even weaker than the 10.3 million annualized pace of December.

General Motors reported a 49 percent slump in monthly sales from a year ago. While Ford’s sales fell 40 per cent and Chrysler’s 55 per cent decline.

Jesse Toprak, analyst at Edmunds.com said, “The core of the problem is consumer confidence crisis and that is a problem that is going to take a number of months,” he said. Toprak said he sees some pickup in sales in the coming months to an annual pace of 10 to 11 million vehicles, and possibly 12 million or more by the end of 2009.

But the domestic automakers “can’t survive if sales rates of 10 million or less linger for a long time,” he said.

GM and Chrysler, which have received emergency US government loans, must demonstrate their viability to avert bankruptcy. Ford has said it does not see a need for government loans at this time.

Dave McCurdy, president of the Auto Alliance, which represents major manufacturers in the US market, sees a slow recovery for the sector. “Clearly we suffer the fate of the overall economy,” he said at the Washington Auto Show. McCurdy added that a big factor is whether the new administration of President Barack Obama can restore consumer confidence.

Chrysler LLC, the troubled number three US automaker said it sold 62,157 vehicles, less than half the number sold in January 2008 and a 31 per cent month-over-month drop. Some of the drop resulted from an 81 per cent drop in fleet sales as Chrysler moved away from the segment. Chrysler has argued that many customers want to buy new cars but cannot get loans.

Some analysis said the slump in used car prices is making it difficult for consumers to trade in their cars without having to cough up cash in the face of “negative equity” on auto loans.

GM said it delivered 129,227 new vehicles in the month, led by an 80 per cent reduction in fleet sales. At the retail level, sales were of 38 per cent, with retail market share steady compared with December.

Ford said it delivered 93,506 new vehicles in the month, including domestic name plated and its Volvo brand, the number two automaker however said that it sees some signs of stabilization in the market and that its share of the US market is edging higher. A few carmakers reported increases in January including Japan’s Subaru, South Korea’s Hyundai and its Kia affiliate. Toprak said Hyundai struck a positive note with a program offering to buy back vehicles from consumers who lose their jobs in the economic crisis, and said others may follow suit.

“It’s a very smart program that deals with the core of the problem,” Toprak said, “If you give people a bit of security about the future it could go a real long way.”