October auto sales may have hit two-decade low

By Poornima Gupta and David Bailey

DETROIT (Reuters) - U.S. auto sales are expected to plunge to the lowest levels of the year in October and possibly the slowest running rate in two decades, with no certainty of when consumer confidence will return.

The U.S. automakers, struggling to preserve their shrinking pools of cash as they fight for survival, are poised to post sales declines of up to 40 percent, with the overall market sagging potentially to levels not seen since the 1980s, when the United States had 60 million fewer residents.

General Motors Corp, Ford Motor Co and Chrysler LLC are expected to lead the U.S. sales declines, but all six of the top sellers -- including Toyota Motor Corp, Honda Motor Co Ltd and Nissan Motor Co Ltd -- were expected to report lower sales.

High gas prices blunted U.S. auto sales earlier in 2008, but the plunge in consumer confidence -- which hit the lowest level in the four decades as the Conference Board measured it -- has pushed out expectations for a recovery beyond next year.

U.S. October auto sales were "pretty much as advertised," Ford chief sales analyst George Pipas said on Friday, adding that the seasonally adjusted annual rate would likely be around 11 million to 12 million vehicles in October.

But Ford executives hope that government response to the credit crisis would improve the overall retail atmosphere.

"There is a lot of action being taken by the Federal government, by the Federal Reserve, and by the Congress and we are hopeful that will stimulate demand," said Mark Fields, Ford's president of the Americas.

In a bright spot, Ford is confident its retail share of the U.S. auto market in October will rise to the highest in two years.

Barclays Capital analyst Brian Johnson expects a 39 percent drop in sales for the Detroit-based automakers in October, which was marked by low consumer confidence and "particularly poor showroom traffic."

"We believe that the pressure on auto sales from limited credit availability is mounting," Johnson said, adding it appeared dealers were facing a 10 percent to 15 percent headwind from the tighter lending practices.

A BAD MONTH ... NOW A DEAL?

Overall, U.S. light vehicle sales were expected to be in a range of 11 million to 11.3 million vehicles, according to analysts and industry executives -- a sharp decline from 16.04 million last October and 12.5 million last month.

Overshadowing the U.S. sales figures, key early indicators that economists use to gauge consumer spending and the broad health of the U.S. economy, are the merger talks between GM and Chrysler parent Cerberus Capital Management, which could result in the sale of all or part of Chrysler to GM.

Automakers pushed in October to tell customers that financing was still available despite the credit market turmoil and, in some cases, put thousands of dollars on the hood of slower-selling models to try to clinch the sale.

Toyota, which led GM in the third quarter as the world's largest automaker by sales volume, offered zero percent financing across 11 models in an effort to boost demand. Toyota's U.S. sales were down 10 percent through September.