Auto Industry Still Coming to Grips With the Damage of 2008

DETROIT — Carmakers will close out one of the most tumultuous and miserable years in their history Monday when they report what is certain to be another dreadful batch of monthly sales figures.
Each of the six largest automakers, including foreign and domestic brands, is expected to say that its sales in the United States fell at least 30 percent in December. The bleakest numbers will most likely come from General Motors and Chrysler, which both received billions of dollars in loans from the federal government at the end of December to help them remain solvent.
Over all, analysts say 2008 will end up as the worst year for selling cars and trucks since 1992. But that comparison does not capture how quickly business deteriorated in recent months, as credit markets tightened and consumer confidence sank.
“This is the kind of automotive recession that, quite frankly, many of us have never been through,” Erich Merkle, an automotive analyst in Grand Rapids, Mich., with the consulting firm Crowe Horwath, said Sunday. “We know that people who have lost their jobs aren’t in the market for a new car, but even those who have jobs aren’t in the market right now, because they’re concerned if they’ll still have a job in three, six or nine months.”
George Pipas, Ford Motor Company’s chief sales analyst, projected total industry sales for 2008 of about 13.5 million, a full three million fewer than in 2007. Not since 1974 has the market collapsed that much in a single year, he said.
Analysts said December’s sales rate would probably be worse than even the 26-year lows reached in October and November.
“And since the early ’80s, there are 70 million more people that can drive a vehicle,” Mr. Pipas told reporters during a briefing Friday. “So this is even worse per capita than 1982.”
Though high gas prices significantly affected the number and types of vehicles sold throughout much of 2008, the rapid drop of prices recently has done little to help the industry rebound. Sales from September through November were 31 percent lower than the same period in 2007, even as gas prices plummeted by 54 percent. Sales of sport utility vehicles, which used to generate huge profits for the Detroit automakers, were down 51 percent.
Mr. Pipas said passenger cars outsold S.U.V.’s and other light trucks last year for the first time since 2000. The sudden shift in consumers’ buying habits has left the automakers scrambling to build more cars and fewer trucks.
Ford is retooling three former truck factories so they can make compact and subcompact cars; Toyota now plans to make its Prius hybrid sedan in a new plant where it had intended to build S.U.V.’s. Last month, the company said it would delay the plant’s opening because of the market’s decline.
“In the late ’90s, our assumption was that light trucks could just continue, and would never turn back,” Mr. Pipas said. Now, he added, “we don’t think passenger cars will ever look back again.”
Sales of trucks and S.U.V.’s were probably higher in December than in the preceding months, most likely even outselling cars, analysts said, but that is primarily driven by big discounts on many larger models. The average value of incentives per vehicle was almost $1,000 higher in December than a year ago, but on trucks the increase was nearly $1,500, Mr. Pipas said. Full-size pickup trucks now are being discounted by an average of $7,000 to $8,000.
G.M. last week began offering zero percent or low-rate loans on many vehicles in a bid to attract shoppers who had been scared off by a lack of credit. Its lending arm, GMAC Financial Services, received a $5 billion investment from the Treasury Department and immediately reduced its minimum credit-scoring requirements for customers.
Edmunds.com, a Web site that gives car-buying advice to consumers, cited that news in noting an unusual flurry of inquiries on its site and at dealers in the final days of December. Edmunds said some dealers reported making 40 percent of their entire month’s sales in the last week and that site research on G.M. vehicles rose more than for other brands.
“Normally, I would say that such an increase in the last week of December is just at the high end of the usual seasonal pattern, but in the current environment I would say that it is dramatically good news,” David Tompkins, a senior analyst with Edmunds, said.
Yet the automakers are not optimistic about even a modest recovery in vehicle sales for at least several more months. Recent jobless numbers show continued weakening in the economy, and consumer confidence remains at historic lows.
“Consumer confidence, of all the factors you look at, that’s the No. 1 driver of new vehicle business,” Mark LaNeve, G.M.’s vice president for North American sales and marketing, said in a conference call last week.
Still, Mr. LaNeve said, “you’ve got to believe that 2009 is going to be a better year than 2008 was.”