Carmakers Lose Billions as Sales Plummet

The auto companies are in for bad time if the credit markets don't get better quickly. Last month was the worst sales month sold since January 1992 with only 838,000 vehicles. On an annualized basis, the industry is in the worst sales position it has seen since February 1983. Detroit is begging for aid and thinking about mergers.

The sales news was not confined to one company. Sales at Ford fell 30.2%, and at Chrysler by 34.9%. GM has a 45% drop. Toyota’s sales were off 23% in October, Honda’s sales plunged 25.2%, and Nissan’s sales dropped by a third. Ford and GM will release their third quarter results later this week (likely to be very bad), and it's a fair bet to say that their fourth quarter results will be even worse.

Mark LaNeve, head of GM sales and marketing said, “If you adjust for population growth, this is probably the worst industry sales month in the post-WWII era. We believe there is considerable pent-up demand from the last three years, but until the credit markets open up and consumer confidence improves, the entire US economy, and any industry like autos that relies on financing, will suffer.”

George Pipas, Ford's top sales analyst, said in a conference call that the auto industry can now be expected to finish the year at less than 14 million in total vehicle sales. “Oftentimes, we comment on industry segment trends. I have to say when the industry is hovering around 11 million, there are no hot segments or really hot products,” he add9:31 AM 11/5/2008ed.

Meanwhile, GM and Chrysler have been in merger talks for a while now, and they sought support from the US Treasury for a GM buyout or some other structure. The Treasury said that it has $700 billion for financiers, but nothing new for metal bashers like the car industry. It did note that Congress had passed a $25 billion loan package a few weeks ago but that was tied to development of more fuel efficient cars.

GM and Chrysler are both in pretty weak condition, and a merger of two weak companies doesn't very often result in a single healthy entity. Indeed, all it usually does is create a beast that reduces competition but doesn't increase its own efficiency. The airlines are perfect examples of this condition.

However, there is some good news, and it comes from Canada. The Toronto Star's Tony Van Alphen, wrote in yesterday's edition, “showroom business in Canada improved 1.5 per cent, or 1,785 vehicles, to 122,711 during October. It was the industry's best performance for the month since 2002. Car and light-truck sales and leases are also up 1.4 per cent, or more than 20,000 vehicles, to 1.43 million vehicles during the first 10 months of the year in Canada.” Either Canadians didn't open their October investment statements, or they are taking advantage of falling prices brought on by drying up American demand.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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