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Car sales drop to lowest level in years
DETROIT -- U.S. auto sales dropped to their lowest level in more than 17 years last month as consumers stayed away from showrooms, prompting some auto company executives to predict dire consequences if the market doesn't improve.
By the time all automakers reported their numbers Monday, sales had dropped 32 percent to just more than 838,000 vehicles, the lowest monthly sales figure since January 1991, according to Autodata Corp. and Ward's AutoInfoBank.
"This is clearly a severe, severe recession for the U.S. automotive industry and something we really can't sustain," said Mike DiGiovanni, General Motors Corp.'s executive director of global market and industry analysis who said the government should speed up actions to thaw out frozen credit. "There really needs to be actions focused on the consumer and available credit."
GM's sales plunged 45 percent in October, the worst drop of any major automaker. Chrysler LLC, which is in talks to be acquired by GM as a way for both companies to survive in the current climate, saw a 35 percent decline. Ford Motor Co.'s sales dropped 30 percent.
Japanese companies weren't immune from the carnage, with Toyota Motor Corp. sales down 23 percent despite a zero-percent financing offer. Honda Motor Co.'s sales dropped 25 percent and Nissan Motor Co.' sales tumbled 33 percent.
October's seasonally adjusted annual sales rate of 10.6 million vehicles was worst the since February 1983 and far below the rate of 16 million a year earlier, Autodata said. The closely watched figure indicates what sales would be if they remained at their current rate all year, with adjustments for seasonal fluctuations.
"There are no hot segments or really hot products," said George Pipas, Ford's top sales analyst.
The figures were especially troublesome for GM and Ford, both of which are trying to conserve cash and stay in business long enough to outlast a severe economic downturn. Neither company had any idea when sales might rebound to more normal levels.
Emily Kolinski Morris, the Dearborn-based company's senior economist, said that because automobiles are more durable than in the past, people can wait without buying a new vehicle until they feel more confident in the economy.
"The answer to when we will start to come out of that trough lies in when the economy comes out of that trough," Kolinski Morris said on a conference call with reporters and analysts.
The poor sales, though, will mean good deals for people who do want to buy cars. Toyota decided to extend its zero-percent financing offer on most models for another month, while GM announced it would begin its annual "Red Tag" year-end sale Tuesday, earlier than normal. Auburn Hills, Mich.-based Chrysler said it would continue incentives introduced in November that include cash rebates of up to $6,000 and discounted financing on remaining 2008 models.
Toyota's no-interest loans gave it an advantage last month over automakers such as GM and Chrysler whose finance companies are having trouble getting access to capital.
"This managed to breathe some life into an otherwise lackluster month," said Bob Carter, Toyota Division general manager.
But added incentive spending likely will mean automakers, especially Ford, GM and Chrysler, will have to burn up cash at a faster rate to compete in a shrunken market, said Jesse Toprak, executive director of industry analysis for the automotive information site Edmunds.com.
"They will have no choice but to be more aggressive if they want to at least be moving some units," he said.
Industry analysts are concerned that Detroit-based GM, which burned more than $1 billion per month in the second quarter, may run out of money sometime next year if the auto market doesn't improve. Ford, which has borrowed more money than GM, is also cash-strapped but can last longer, they say.
GM's DiGiovanni said no automaker can stay alive in a U.S. market that had the worst year-over-year monthly decline since 1975.
"No matter what manufacturer you are, no matter how deep your pockets are, you are going to be affected severely by this," he said.
If GM's sales were adjusted for population growth, October would be the worst month of the post-World War II era, DiGiovanni said. It was GM's worst year-over-year monthly decline since 1975, he said.
But despite the steep drop, GM's total was enough to keep it ahead of Toyota for the No. 1 U.S. sales spot. GM sold 168,719 vehicles to Toyota's 152,101.
Ford likely will announce car and crossover vehicle production cuts when it announces its third-quarter earnings Friday, Pipas said. Truck production cuts earlier in the year have kept inventories low, but car and crossover inventories need to be brought into line, he said.
Sales of the company's F-Series pickup trucks, traditionally its top seller, fell 16 percent in October, better than Ford's light trucks as a whole, which dropped more than 30 percent. The company began selling a new version of the pickup last month and has announced plans to add 1,000 workers at its Dearborn Truck Plant in January to handle what it expects will be increased demand.
While Toyota offered free financing, and Nissan followed suit with a similar offer on five models starting Tuesday, GM's financing arm, GMAC Financial Services, said last month it tightened its lending standards to require a credit score of at least 700, shutting out some buyers.
Mark LaNeve, GM's vice president for North American sales, said steep cutbacks in leasing and lack of available credit accounted for half of GM's year-over-year sales decline.
Analysts said GM's employee pricing incentives in August and September likely pulled in buyers who would have waited to purchase cars, further reducing October sales.
The Associated Press reports unadjusted auto sales figures, calculating the percentage change in the total number of vehicles sold in one month compared with the same month a year earlier. Some automakers report percentages adjusted for sales days. There were 23 sales days last month, two less than in October 2007.
Bree Fowler reported from New York. AP Auto Writer Dan Strumpf in New York also contributed to this report.