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US automakers face 30% drop in sales
Undercut by tight credit and a weak economy, November US auto sales are expected to have dropped by some 30 per cent from a year earlier, extending a year-long downturn that has pushed Detroit-based automakers to the brink of failure.
- Reuters
- Published: 23:31 November 29, 2008
Detroit: Undercut by tight credit and a weak economy, November US auto sales are expected to have dropped by some 30 per cent from a year earlier, extending a year-long downturn that has pushed Detroit-based automakers to the brink of failure.
US automakers, struggling to conserve cash as they battle for survival, are poised to report sales declines of about 35 per cent. Japanese automakers such as Toyota Motor are also certain to have been hit by collapsing demand in the world's biggest vehicle market.
November sales are due for release on Tuesday, the deadline for US automakers to submit turnaround plans requested by Cong-ress for considering a $25 billion in government loans for the cash-strapped industry.
General Motors and Chrysler have both warned it would be difficult to survive without urgent government funding.
Honda Motor Executive Vice-President Koichi Kondo said US auto demand looked "bad" again in November, adding Honda's sales decline would be only slightly narrower than the 28 per cent drop posted in October.
"There's a bottom somewhere but I'd like to know where it is," Kondo told Reuters in an interview.
Analysts expect US light vehicle sales to be down from 28 per cent to 34 per cent in November from a year earlier.
The seasonally adjusted annual rate of sales, a key indicator tracked by analysts and the auto industry, is likely to come in between 10.5 million and 11.5 million vehicles, down from the 16.1-million-units rate recorded in November 2007.
The year-to-year decline in November sales would mark the 13th consecutive monthly drop in US auto sales, extending a slump expected to be running at least through 2009.
Analysts said the only modestly encouraging aspect to November sales is likely to be that the annualised sales rate will have come in a bit higher from the 10.6-million rate for October, bolstered by aggressive discounting by the automakers.
October's result was the lowest sales level in 25 years.
Toyota extended a zero-financing offer it had launched in October during November. Nissan Motor began its own zero-per cent offer and GM rolled out a "Red Tag" sale with lower vehicle prices and cash-back offers.
In the spotlight
The November sales data will be watched in Washington, where US lawmakers are scheduled to reconvene to review the restructuring plans submitted by the US automakers and consider their request for a $25 billion rescue package.
Analysts have said some form of government assistance is more likely than not amid growing concern about the risks to the US economy from failing to prevent a collapse of one of the Detroit automakers.
On the other hand, the high-profile debate about the risk of a bankruptcy by GM or Chrysler could have hurt their sales in November, JPMorgan analyst Himanshu Patel said.
High gas prices and a weak housing market weighed on US auto sales earlier in 2008, but the plunge in consumer confidence to near record lows in the wake of the credit market turmoil has pushed out expectations for a recovery to 2010 and beyond.
Standard & Poor's expects US light vehicle sales of 13.3 million units in 2008 - the lowest level in 15 years - and 12.3 million units in 2009, down from 16.1 million in 2007.
"The most common comment we have received from dealers and other industry sources is that November looks a lot like October - no better but also no worse," Deutsche Bank analyst Rod Lache said.
He forecast an annualised sales rate of 10.5 million units for November.
Lache expects GM sales to be down 42 per cent from a year ago, Ford sales down 33 per cent and Chrysler off 45 per cent.
Toyota sales are seen down 25 per cent, with Honda and Nissan seen posting sales declines of 25 per cent and 35 per cent, Lache said
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