State of the U.S. auto industry: bleak

By Rick Popely

CHICAGO (Reuters) - U.S. auto companies face a wall of problems these days as they scramble to meet terms of federal bailouts, cut thousands of jobs and struggle under mountains of debt.

But their main problem looks set to elude any quick fix.

Loans from the federal government in December enabled General Motors Corp (GM.N) and Chrysler LLC to keep their factories operating a few more months.

But the core problem they faced in December -- too few buyers -- has only worsened, making their prospects look even dimmer in coming months. U.S. auto sales plunged 37 percent in January to the slowest pace since 1982.

Independent auto analyst Erich Merkle expects sales to pick up in the second half of 2009, partly because the bar set by last year's dismal second half was so low. But soaring U.S. unemployment rates in recent months have him worried.

"I'm concerned about the job losses. The acceleration is pretty alarming, and that has to stabilize," Merkle said.

"If we don't beat the second half of 2008 this year, then it could be all over. We're all going to be peeling bark off trees and go back to being an agrarian society."

The plummeting auto sales that brought Detroit automakers to their knees, and begging for help from Congress, have now become a global epidemic.

Toyota Motor Corp (7203.T), which passed GM last year to become the world's top automaker, last week forecast a loss of $4.95 billion for the year to end-March.

That was sharply higher than the loss Toyota had forecast just six weeks earlier when it said it would post the first group-wide loss in its 70-year history.

Nissan Motor Co (7201.T) said on Monday it expects to lose nearly $2.9 billion and would seek financial help from the U.S. Department of Energy to develop more fuel-efficient cars.

"The whole industry is in serious trouble," IHS Global Insight analyst Aaron Bragman said on the eve of the Chicago Auto Show, which opened on Friday. "The pain is starting to be shared across the board."

GM and Chrysler are due back in Washington on February 17 to present progress reports to justify their $13.4 billion in federal aid awarded since December and to ask for more.

Ford Motor Co (F.N), which has yet to ask for federal aid due to a jumbo loan it took out in late 2006, may soon have to because it is in danger of running out of cash before auto sales recover.

But the chances of that recovery seem to dim by the day as layoffs jolt the economy, further eroding consumer confidence.