Luxury Car Sales Keep Skidding

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"Luxury sales, we believe, will bounce back in the second half of the year," says O'Donnell, who cites President-elect Barack Obama's proposed stimulus package and the $700 billion Wall Street bailout for his optimism. "I have heard estimates for the whole industry as low as 10.3 million [vehicles sold] this year, and that just can't be with all this stimulus."

Daimler-Benz (DAI) CEO Dieter Zetsche, who previously ran Chrysler in the U.S., says the collapse of auto sales, including luxury, in the fourth quarter surprised him. "Usually, luxury car sales drop a few months after a financial event like we had, but this time it was immediate." Still, says Zetsche, "people don't trade out of brands like Mercedes-Benz easily.…We have the highest loyalty rate in the industry." About 40% of Mercedes buyers in the U.S. are over 50 years old, which is the demographic most likely to be rethinking big-ticket purchases as they get nearer to retirement with depleted savings.

Forecasting sales in 2009 is proving too difficult for auto companies, including luxury brands. Guessing how the consumer will react, and comparing this recession to past financial setbacks, say some executives, is impossible. "This crisis is a deep, structural crisis.…The financial system in the U.S. is broken," says Volkswagen of America CEO Stefan Jacoby. "Usually I can set annual targets and goals, but I can't do that this year," he added.

No Retreat for Volkswagen

Volkswagen is one of the brands that could benefit from a traditional luxury car buyer retrenching, and altering buying habits. VW offers the German engineering pedigree, but at prices much lower than Mercedes-Benz, BMW, and even its corporate sibling Audi, which is owned by Volkswagen AG (VOWG). VW also gained market share in 2008.

Indeed, despite the recession, Jacoby says he is sticking with the company's sales target of increasing combined Volkswagen, Audi, and Bentley sales in the U.S. to 800,000 by 2018, up from about 300,000 in 2008, with the vast majority of that increase expected to come from Volkswagen.

Independent marketing consultant Dennis Keene says mass brands like VW, Hyundai, and Ford have chosen a good time to come forth with a lot of very good products that probably exceed customer expectations. "I won't go so far as to say the recession will be good for some car companies, but the fact is that some companies will gain share and benefit at the expense of others," says Keene.

Click here to see a lineup of high-end cars that are getting crossed off many millionaires' shopping lists as the economy continues to struggle.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.