For automakers, the end of a miserable 2008 could not have come soon enough. Unfortunately for them, 2009 figures to be worse.
Ken Bensinger / Los Angeles Times | Posted: Tuesday, January 6, 2009 12:00 am
For automakers, the end of a miserable 2008 could not have come soon enough. Unfortunately for them, 2009 figures to be worse.
Final U.S. auto sales tallies were released this week, and automakers finished the year with 13.2 million cars and light trucks sold, down from 16.1 million in 2007.
Among individual carmakers, Chrysler had the worst year, with sales down 30 percent, while General Motors was off 23 percent and Ford declined 20 percent. Even Japan’s Toyota and Honda, long held up as exemplars, took it in the gut, with sales off 15 percent and 8 percent, respectively, on these shores. All told, it was the worst year for sales since 1992 — when there were 70 million fewer Americans.
“I’m glad this year is over,” said Mark LaNeve, North American head of sales and marketing at GM, during a Monday conference call.
According to industry analysts, and even GM itself, 2008’s decline of nearly 3 million units — an 18 percent decrease — could be followed by another slide of 2 million to 3 million units this year as the recession continues.
That’s a grim forecast for an industry that has cut deeply to reduce costs while trying nearly everything to draw consumers to dealership lots. And it raises real questions about the viability of an industry already on the rocks. Last month, Toyota said it expected to post its first operating loss in 70 years.
“It’s hard to be optimistic about 2009,” said Mark Oline of Fitch Ratings. His company projects U.S. sales to fall 11 percent more this year, to about 11.7 million vehicles, a level he and others call “unsustainable” for an industry that grew fat in a market accustomed to annual sales topping 16 million.
Oline noted that the category of vehicles least affected by the current downturn, small cars, also happens to have the lowest profit margins, a troubling prospect for an industry accustomed to selling lots of pickups and sport utility vehicles. “There’s no hiding for anybody right now,” Oline said.
At the close of 2008, every major automaker save one, Subaru, showed a sales decline. The Ford F-series pickups maintained their spot as the top-selling vehicle in the United States, despite a 25 percent sales drop compared with 2007.
A year ago, such dire straits would have been hard to predict. For the first few months of 2008, sales continued pretty much apace with a year earlier. It was not until spring, when soaring gas prices devastated the market for trucks and SUVs, that sales soured.
Then credit markets froze, and consumer confidence dried up. Even hybrids, the hottest category of car the first six months of the year, were nailed to dealership floors by Labor Day.
By year’s end, GM and Chrysler had received emergency loans from the government, Ford was hanging on by a thread and imports such as Nissan were facing monthly sales declines exceeding 30 percent. Even plummeting gas prices, down more than half from summer highs, have done little to spark consumer interest.
Now, Chrysler has all its plants on temporary furlough, GM is idling 20 plants for most of this month and Toyota has put plans to build its Prius hybrid in Mississippi on indefinite hold.
Dennis Virag, president of the Automotive Consulting Group, predicts sales of 11.5 million vehicles this year and says there’s little reason to think the situation will change soon. Until consumers are willing to make large discretionary purchases — a decision that’s contingent on a stabilized housing market and a decline in unemployment — sales are likely to remain down.
That, in turn, will crush the balance sheets of already weakened companies.
“There’s a lot of panic on Main Street right now,” Virag said. “I think we’re going to see a lot of heartburn within the carmakers and a fair number of bankruptcies among the automotive suppliers.”
He said the $13.4 billion lent in recent weeks to Chrysler and GM won’t be nearly enough for the companies, and that Ford could be forced to hit up Washington, too, unless there’s a radical turnaround in the economy.
On Monday, executives at the carmakers placed their hopes on Washington and in particular the incoming Obama administration, which has pledged to deploy a huge economic stimulus package designed to halt the recession and get consumers spending again.
“The existence of a stimulus package will be a key factor supporting a recovery” for the industry, said Emily Kolinski Morris, Ford’s senior U.S. economist.