Auto sales plunge as credit crunch hits
WASHINGTON (Reuters) - Major automakers reported plunging U.S. sales for September -- led by a 34 percent slide at Ford Motor Co -- as an escalating credit crisis hit the slumping industry and raised new doubts about when the world's largest auto market would stabilize.
The 26-percent drop in industry-wide auto sales was sharper than expected and coincided with a crisis on Wall Street that automakers said rocked consumer confidence and made it harder for remaining shoppers to finance vehicles.
Sales were down 24 percent at Honda Motor Co, 32 percent at Toyota Motor Corp and 37 percent at Nissan Motor Co. Chrysler LLC sales were down 33 percent.
General Motors Corp, which was more aggressive in its discounting by offering an employee-price sale, posted a 16-percent sales decline. That was a narrower decline than analysts had expected, and it made GM the only major player to gain significant share in a collapsing market.
Across the board, auto executives said Americans had either walked away from vehicle purchases or been stymied by a lack of financing or requirements for larger down-payments.
The bleak sales results represent one of the earliest readings of the impact on Main Street from a now global credit crisis that has triggered a consolidation on Wall Street.
Toyota's sales decline was its steepest since 1987. The Japanese automaker's sales were down by over 40 percent in key regional markets, including California, where the drop in housing prices has hit consumers the hardest
As the stock market fell and the debate in Washington on a financial bailout raged this week, some buyers of Toyota's luxury Lexus models asked for deposits back.
"We saw the trend steadily decline," Toyota sales chief Bob Carter said of the uncharacteristically weak demand at the end of the month when sales normally peak at dealerships.
Ford also said the debate over the still-pending, banking bailout stopped buyers in their tracks by injecting a new note of uncertainty. "It was tantamount to a natural disaster," said Ford sales analyst George Pipas.
Ford's sales decline was deeper than analysts had expected, suggesting "continued pressure" on its share price, JP Morgan analyst Himanshu Patel said in a note.
Erich Merkel, an auto analyst and consultant with Crowe Horwath LLP, said it appeared Ford, the No. 2 U.S. automaker behind GM, had lost sales to its larger rival's employee price offer. "Those two tend to swap punches quite a bit," he said.
Shares of Ford fell almost 13 percent on Wednesday. GM shares were almost unchanged.
Some analysts and industry executives had held out hope that U.S. auto sales had hit bottom in August after a summer of wrenching declines tied to higher gas prices.
But the September sales result was far weaker than expected with overall sales dropping to an annual rate near 12.5 million vehicles, according to sales tracking firm Autodata Corp.
The drop in sales comes despite stepped-up discounting by automakers, a move that cuts into profit margins.
Edmunds.com, an industry tracking service for consumers, estimates that the discount on the average vehicle for September was $2,801, up 19 percent from a year earlier.
Sales for luxury German brands were also hammered. Sales for Daimler AG's Mercedes-Benz dropped 16 percent. BMW was off 30 percent; Porsche fell 45 percent.
"We're in a recession -- I keep saying that to people," Merkle said. "And this is how the issues we have in housing are spilling into the broader economy."
The weak sales underscore the risks for auto dealers, who are contending with dwindling sales, higher costs for inventory and increasing difficulty finding lenders for their customers.
The top U.S. auto dealership group AutoNation Inc said on Tuesday that car loan approval rates had dropped to about 60 percent from 90 percent a year ago.
Ford Motor Credit and Chrysler Financial, now owned along with Chrysler itself by Cerberus Capital Management, both were forced to raise the interest rates charged to dealers to finance inventory, executives said.
Advisory firm Grant Thornton said in a forecast released Wednesday that it expected more U.S. car dealerships to close over the remainder of this year and into 2009.
Bill Heard Enterprises Inc, one of the biggest General Motors Chevrolet dealerships, filed for bankruptcy protection on Sunday, citing losses, decreased demand and lack of credit.
At its peak, annual revenue for the Alabama-based retailer was about $2.5 billion, according to the bankruptcy filing.
(Additional reporting by David Bailey and Poornima Gupta in Detroit, editing by Gerald E. McCormick and Bernard Orr)
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