US car sales could hit 26-year low next year

By Arlena Sawyers, Crain News Service

Detroit, Michigan -- Sales of new cars and trucks in the US are expected to fall to an estimated 11.5 million units next year, the lowest sales total since 1982, according to Michael Robinette, vice president of forecast services with consulting firm CSM Worldwide.

US auto sales already are reeling. Through November, sales plunged 16.3 percent to 12.4 million vehicles, according to Automotive News. Sales in 2007 totaled 16.2 million vehicles, indicating a full-year decline of more than 15 percent.

The low sales projections for 2009 cast more gloom as the Senate threw out proposals for auto bailout loans. The House approved a $14 billion loan bailout plan for General Motors Corp. and Chrysler L.L.C. the Senate rejected the plan in the face of resistance to pay cuts from the Union of Auto Workers.

Mr. Robinette said Chrysler's survival as a full-scale auto company in 2009 is doubtful. That, combined with consumers' turning way from GM brands that the company has indicated it wants to shed - such as Saturn - could lower the Detroit 3 auto makers' market share to 43 or 44 percent next year. The Detroit 3's market share was 47.4 percent through the first 11 months of this year, according to Automotive News.

“You´re looking at Detroit market share south of 45 percent next year in the US,” Mr. Robinette said during a presentation to the Automotive Press Association in Detroit.

Mr. Robinette also predicts that Chrysler will be sold off in pieces in 2009 and 2010, with some vehicles such as the Jeep Grand Cherokee, minivans and pickups being attractive to some buyers.

He said a federal car czar, if appointed as part of the bailout for the Detroit 3, should oversee a “controlled wind-down” of Chrysler, should it be sold.

“To have it all stop tomorrow isn´t what the industry wants or needs,” Mr. Robinette said. “They need some lead time to work this through the system.”

More pain will be inflicted on auto suppliers in the process, said Jim Gillette, director of financial services at CSM.

He said the possible demise of Chrysler, years of debt buildup and excess capacity could push up to 25 percent of auto suppliers into bankruptcy or consolidation over the next two years, putting 100,000 employees out of work.

Mr. Gillette added: “We are going to lose jobs; we are going to lose suppliers. The supplier base will shrink.”

From Tire Business (A Crain publication)