Lifestyle

Auto Sales Slide for the 11th Month in a Row


Every single carmaker saw big shortfalls in September. Nissan, Ford, GM, Honda, and Toyota all posted double-digit declines

U.S. auto sales in September fell 27%, to 965,160—the first submillion sales month since January 1993—with Detroit automakers getting hammered the worst as consumers stayed away from showrooms in the last week at levels not seen since the terrorist attacks in September 2001.

Ford (F), which saw sales drop 34%, said consumer fear of taking the plunge, on a big-ticket purchase like a car, was fueled by the national discussion over the congressional economic bailout debate in the past week, on top of already bad economic data. "I don't think anyone can say where the bottom [of the current downturn] might be," said George Pipas, Ford's chief analyst. Toyota (TM), usually a stalwart in tough economic times, saw its sales fall in September by 32%.

General Motors (GM) reported sales down 16% in September, but said its market share in September in was probably at or more than 29%, it's highest level since mid 2005. GM sales chief Mark LaNeve said the automaker's performance in such an anxious economic climate looked "strong." "If I had seen these numbers six months ago, I think I would have jumped out the window, and I'm on the 37th floor," said LaNeve.

Down, Down, Down

Asian and European carmakers were battered across the board. Honda (HMC) was down 24%. Even Nissan (NSANY), which saw positive sales in August and July, was down 37%. Hyundai was off 25%. Volkswagen (VOWG) was off 9.4%. BMW (BMWG) was down 26%. "Obviously, no one is immune to market shifts as dramatic as we have been seeing," said Dick Colliver, executive vice-president for sales at Honda Motors.

Industrywide, sales fell for the 11th month in a row, the longest slide in 17 years.

The lack of credit available to many consumers and businesses, as well as a big pullback in leasing vehicles, has made it much tougher for car dealers to close loans for consumers. GM's LaNeve said the credit crunch is probably costing GM some 12,000 sales per month. Leased vehicles accounted for just 1% of GM sales in September, whereas it is usually as much as 10%. Even car rental agencies are keeping cars in their fleets longer, as they are having difficulty getting credit.

Chrysler, which reported a 33% drop in sales in September, said that would-be buyers with FICO credit scores of 660-700, who were able to get auto loans a year ago, aren't getting them in the current economic environment and strain in the credit markets. A FICO score, named after the outfit that developed it—Fair Isaac & Co.—is one number between 300 and 850. The higher your number, the better the chance you will make your loan payments and make them on time, lenders believe. About 60% of people have credit scores of 700 and above. The best number to have is 720 or above.

Refusing the Loan

Part of the economic bailout package being debated by Congress this week could include language that would make it easier for banks to extend credit for auto loans. "I'd vote for that one," said GM's LaNeve.

Loan refusals are at their highest levels since 1984, when the data started to be tracked. CNW Marketing Research, Bandon, Ore., reported that just 63% of auto loans have been approved this year, vs. 83% last year.

Car dealers are hurting as much as consumers. More than 700 dealers out of 20,770 dealerships in the country have gone out of business this year including the largest Chevrolet dealer group in the U.S.

Tempting Deals

For those who have the inclination and the credit scores to buy a car today, the deals are plentiful. GM, which ended an employee-pricing offer, is launching 0% financing on an array of models and for varying loan lengths. Chrysler began offering a new raft of cash rebates and loan discounts. The automaker has virtually ended vehicle leasing, and has channeled extra money into retail sales discounts.

Edmunds.com said that sales incentives in September averaged $2,801 per vehicle. That is 18% higher than a year ago. But while incentives have remained high, above $5,000, on many SUVs and trucks, discounts on small cars are virtually nonexistent as demand for thrifty small cars continues to outstrip supply.

Whether the higher incentives will be enough to offset anxiety over the economy and a highly partisan and divisive election will be enough to nudge people closer to signing up for new car loans remains to be seen. Says independent marketing consultant Dennis Keene, who works with consumer product companies on forward planning: "October could easily be worse than September."

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

China's Killer Profits
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus