One Scary October

Posted by: David Welch on November 3, 2008

October was an ugly month, a very ugly month. Car sales dropped 32% as consumer confidence hit an all-time low (at least, for as long as someone has kept track) and banks were tighter than two coats of paint with lending. General Motors had it the worst with sales falling 45%. Even Toyota and Honda sales fell at least 23%.

It was so bad that normally-optimistic executives whipped out the superlatives to describe how weak sales were. GM called it the worst month since World War II. Mike DiGiovanni, GM’s chief market analyst, called it “a dire era.” He said these paltry sales raltes are “unsustainable” for any carmaker. Mark LaNeve, the vice president of North American sales and marketing, says sales were slammed and said consumers are “shell shocked.” DiGiovanni even followed up by saying that the government and banks need to break a credit deadlock and help finance car buyers to get sales moving again.

They aren’t exaggerating, either. It’s hard to tell who is tighter, consumers or banks. Probably consumers, since low showroom traffic is more to blame. But a selling rate of 10.7 million vehicles in a market that, until this year, had rarely been below 15 million vehicles is dismal. The carmakers won’t be able to react fast enough with cost cuts. Oh, and Toyota? The company that likes to say it would hate to see Detroit fail? It capitalized on Detroit’s credit problems with 0% financing deals. The company sales were down but market share in teh U.S. shot up from 16.8% to 18.1%. That’s not far from GM’s 19.9% for the month.

Privately, GM executives say the Bush Administration isn’t stepping up to help. Talks are ongoing and fluid, but GM, Ford and Chrysler are going to need some cash to get through this. If they make it, there will be consumers coming out to buy cars. Pent up demand will be released. But Detroit will need a hand up to survive this one.

Reader Comments

john

November 3, 2008 9:32 PM

I don't think a "hand up" will do anything. What could 25 Billion do? That wouldn't even all go to GM, and GM would need far more than that for a turnaround to be even thinkable. This is a vegetable company that is begging to be kept on life-support. It's a dinosaur. The environment has changed.

Paul (Vw)

November 4, 2008 10:09 AM

>>> Privately, GM executives say the Bush Administration isn’t stepping up to help.

I'd be interested in hearing a qualification of just what this means. I'm not a Bush supporter, but I also am skeptical when his administration is blamed for every conceivable ill there is.

That being said, where can I find information on what GM models are not selling? I went to some GM dealerships this past weekend (hoping to see some great incentives to purchase a vehicle) and was unimpressed with what I saw. The sales guy at a Saturn dealership insisted that sales were not off (he said he typically sells 15 vehicles a month and has sold 12 in October).

If I knew what GM models were not selling, perhaps I might be able to negotiate a good price (and help out GM). (though I need something with a manual transmission)

David Welch

November 4, 2008 2:01 PM

David Welch here. I'm the magazine's Detroit bureau chief and writer of this blog post. To Paul, thanks for reading and writing in. Just to clarify, the item doesn't blame the Bush Administration for anything. It merely points out that, while GM has been asking the federal government for help, perhaps even access to the $700 billion bailout package for banks, the administration has yet to greenlight it. Talks are ongoing, but nothing has happened yet. The post isn't a political statement. It is simply reporting what has happened to date.

Earthling

November 4, 2008 3:02 PM

Everyone knows that fossil-fueled reciprocating piston engines are dinosaurs, yet the auto companies think we'll keep buying them for another century. Driving two-ton hydrocarbon-belching monsters crammed bumper-to-bumper over a paved landscape is not sustainable environmentally and is completely inefficient and unaesthetic transportation. Anyone buying a motor vehicle today is acquiring a museum piece of failed technology.

David James

November 4, 2008 3:18 PM

I have worked in advertising for years, and basically came to the conclusion that the industry exists to sell people things that they DON"T NEED.

All these whiners complaining about the drop in sales need to seriously consider what they are selling and WHY!

c.l.shannon

November 4, 2008 3:19 PM

there should be NO help coming from the government or taxpayer - NONE WHAT-SO-EVER!!!

these big three companies saw the same reality that toyota and honda did and made all the wrong choices for all the pig-headed greedy reasons - short-term profit over long-term company sustainability.

the big three have offered pretty unispiring vehicles up unitil a few years ago and lost the loyality of hundreds of thousands of consumers. they bet their lives on gass-guzzling SUVs and trucks and lost the bet. they should be allowed to fail.

i have no sympathy for the executives who run these companies into the ground - i am sorry for all the honest, hard working employees whose lives will thrown into chaos.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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