US auto sales drop 37 percent to 27-year low

ERJ staff report (AN)

By Chrissie Thompson, Crain News Service

Detroit, Michigan -- US auto sales dropped 37.1 percent in January, dragged down by the Detroit 3 car makers, as the industry posted its lowest monthly total in 27 years.

Ford Motor Co.'s 41.6-percent fall and General Motors Corp.'s 49-percent drop were steeper than analysts' forecasts. Chrysler LLC's sales tumbled more than 50 percent for the second straight month. American Honda Motor Co. Inc., Nissan Motor Corp. USA and Toyota Motor Sales USA Inc. all slipped more than 27 percent, cementing the industry's fourth straight monthly slide of more than 30 percent.

The January sales total of 656,881 vehicles was the lowest since December 1981 and marked the 15th consecutive monthly decline. The annual selling rate of 9.8 million units matches a rate last seen in August 1982.

The credit crunch is stifling sales, said John Broderick, general manager of Burlington Automotive's Chevrolet store in Burlington, New Jersey.

“Financing is very difficult. It's the toughest I've ever seen,” he said.

Last autumn, GMAC Financial Services effectively stopped consumer lending, requiring credit applicants to have prime credit scores. The GM-exclusive lender loosened restrictions in December, but said recently it financed just 5000 purchases in January. Only one of those deals was from Mr. Broderick's store.

GM today responded by initiating a round of incentives that includes 0 percent financing and higher rebates. The program covers some of GM's best-selling vehicles, including the Chevrolet Malibu.

Only two companies posted gains in the month-Hyundai-Kia and Subaru-each rising about 8 percent. Subaru was the only auto maker to record an increase in US sales last year.

The industry's January results reinforce projections that any recovery won't happen before midyear. The poor sales numbers also heighten the challenges for GM and Chrysler.

The two companies are preparing viability plans for the US Treasury Department in order to preserve the $13.4 billion in federal loans they have already received.

Ford is trying to continue operations without federal aid, despite burning through $5.5 billion in cash last quarter.

Last year´s light-vehicle sales dropped to 13.2 million, as soaring fuel prices in the first part of the year and a global credit crunch later in the year deepened a national recession.

The biggest reasons for the decline in last month's sales rate was the fleet market, said Ford sales analyst George Pipas. “We estimate the industry fleet sales were down 65 or more percent from a year ago.”

January fleet sales fell partly because of U.S. auto makers' extended plant shutdowns after the year-end holidays, analysts said. In addition, some corporations took advantage of GM's December fleet incentives.

Reporters Jamie LaReau, Amy Wilson and Kathy Jackson contributed to this report, which was published in Automotive News, a sister publication of European Rubber Journal.

From Automotive News (A Crain publication)