Key to the Highway

Observations about cars and the auto industry

2008 Auto Sales: Skid Marks Before the Cliff

Most automakers announced December sales figures today, and once again the news is dismal. However, the annual declines are what deserve our attention. GM and Ford haven’t seen sales figures this low since the late 1950s and early 1960s, respectively. The General realized a 22.7 percent decline in sales for 2008 vs. 2007; Ford dropped 22.8 percent, however that factors in Land Rover and Jaguar, which were sold to Tata Motors in mid-2007. [Full data from Automotive News]

Chrysler’s decline of 30 percent is topped only by luxury marque Aston Martin and Isuzu. Isuzu announced a year ago that it would cease sales of its light trucks at the beginning of this year. Result: sales fell by a third from 2007.

Let’s return to Chrysler and why the news is even worse than the 2008 sales plummet suggests. By mid-2007 Chrysler was suffering from excess inventory. Forgot a target figure of 60 days, some models had accumulated more than 100 days’ supply. The Chrysler Sebring/Dodge Avenger—”all new for 2007″—saw fleet sales of about 70%. All told, the past two years put the Pentastar in a precarious position. Excess capacity, excess inventory, high fleet sales and a high concentration of some of the worst vehicles introduced in the past five years. It all adds up to one of the sorriest states in which any corporation has found itself during the past 20 years. Survival is going to be dependent on something more than aid from the federal government. The fact that parent company Cerberus asked for, and got, taxpayer money is a sore subject for another editorial.

Among the so-called transplants—foreign automakers with substantial manufacturing operations in North America—Toyota was the big loser with a 15.4 percent drop—more than Nissan or Honda.

Why? It’s not easy to read the tea leaves because Lexus and Scion sales figures aren’t broken out. However, in the great tradition of the blog-o-sphere, I’m willing to offer a theory venture a guess. Lexus sales could be down because it’s a luxury brand, owners are willing to keep a car longer and the fringe buyers can’t get loans or leases because of tighter credit. Scion sales might be suffering because the brand’s youth orientation targets buyers who might not have the ability to buy a new vehicle at any price in a tight credit, tight job market. For the parent brand, Camry, Corolla and Prius sales just weren’t enough to offset the decline in Tundra and SUV sales, along with the stagnant sales across the rest of the model lineup.

Nissan, which includes Infiniti, saw its sales drop 11 percent, while Honda’s decline was 8 percent, including Acura. Normally, those figures are terrible and indicative of deeply rooted problems within a company. Not so for 2008, where a single-digit decline looks pretty good.

The smaller Japanese automakers were a mixed bag. Mitsubishi reported a 24.6 percent decline, while Subaru eeked out a razor-thin gain of 0.3 percent. Suzuki and Mazda have yet to report.

German brands were also a mixed bag. While offering practical vehicles helped Volkswagen, offering luxury and/or performance was no guarantee of a double-digit decline. Porsche sales dropped 25 percent and BMW 10 percent, while VW’s—including Audi and Bentley—declined 4.4 percent. Mercedes-Benz parent Daimler AG notched a small drop of 1.5 percent.

The outlook going forward is also gloomy, according Rebecca Lindland, an automotive research anaylyst at Global Insight:

•    December sales were supported by continued industry-wide high incentive levels as manufacturers attempted to end the year on some semblance of a high-note.  Nevertheless, we remain unconvinced that the light-vehicle sales rate has hit its bottom, and our outlook for Q1 and Q2 2009 remains dimmer than current sales levels.

•    The outlook for North American light-vehicle production for the next two years is taking on a worst case scenario. We have removed 1.895 million units [from the] 2009 North American light-vehicle forecast, of which, 1.008 million are passenger cars and 887,000 are light trucks. The majority of the 2009 reductions are in the first half of the year.

Annual sales figures are, of course, a snapshot relative to the product development and life-cycle time frame of several years. This means a modest sales gain in 2009 will be the equivalent of pulling your feet out from under the dirt in a collapsing trench. You might be standing a bit higher, but the walls are still caving in.

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