DETROIT (Reuters) - U.S. auto sales plunged 32 percent in October to lows unseen in a quarter-century led by a 45 percent drop at General Motors Corp in a collapse that hit every major automaker and offered little sign that the industry has hit bottom in its largest market.
Hurt by tighter terms on auto financing by skittish banks and finance companies and the worsening economy, U.S. auto sales fell to their weakest monthly level since February 1983, according to sales data released on Monday.
The decline in U.S. October sales represented the first results since word emerged last month of merger talks between GM and Chrysler LLC and seemed certain to strengthen calls for a new government aid package for the embattled U.S. industry.
Auto sales for four European countries reporting on Monday showed the spreading effect of the slowdown. Sales fell 40 percent in Spain and 19 percent in Italy.
The United States, the world’s largest vehicle market, remains at the industry’s vortex. October represented the weakest month for U.S. auto sales on a per-capita basis since the end of World War Two, GM said.
Sales for Toyota Motor Co fell 25 percent, Ford Motor Co was off 30 percent, Nissan Motor Co tumbled 33 percent and Chrysler LLC sales fell 35 percent.
“The financial crisis has generated an abrupt constraint on economic activity,” said Ford economist Emily Kolinski Morris.
Ford said it could reduce production of passenger cars and crossover vehicles in the coming weeks by cutting overtime and suspending work at some of its plants.
Industry-wide U.S. sales of cars and light trucks dropped to 838,156 in October after falling below the 1 million threshold in September for the first time in 15 years. It marked the twelfth consecutive monthly sales decline.
In the annualized terms tracked by analysts, the auto industry recorded a U.S. sales rate of just under 10.6 million vehicles in October, down from over 16 million a year earlier, according to Autodata Corp.
That raised the stakes for an immediate and more aggressive round of discounting in November and December as automakers prepared to clear remaining 2008 model-year inventory in exchange for cut-rate financing and other incentives.
GM said it would roll out a “Red Tag” sale with lower vehicle prices and cash-back offers starting on Tuesday.
Toyota, which has overtaken GM as the global auto sales leader, extended a zero-percent financing offer it had launched in October and backed by a high-profile ad campaign aimed at capitalizing on the relative strength of its financing arm.
Nissan launched its own zero-percent offer for November and December, saying the financing deal would help its own results move higher from October levels.
Jesse Toprak, an analyst with Edmunds.com, said the U.S. market could steady over the remainder of 2008 but said it would take until 2010 for a real recovery.
“A lot of consumers are now waiting for the dust to settle and instead of making big ticket item purchases like a car, they are waiting for more certainty in the marketplace and some signs of hope for a recovery,” he said.
The U.S. sales decline hit everything from budget-minded brands to the most expensive luxury nameplates.
Sales at the mass market Hyundai Motor Co were down 31 percent while its affiliate Kia fell 39 percent. At the high end, sales for Porsche sank 50 percent, while Lamborghini and Bentley posted declines of over 60 percent.
Citing an “unprecedented credit crunch,” GM’s North American sales chief Mark LaNeve said cutbacks on leasing and consumer financing at GM’s affiliated financing company GMAC were responsible for about half of GM’s monthly sales drop.
“It was like someone turned off the lights in the month of October,” LaNeve said.
GM had sought some $10 billion in government aid to support the merger, a request the U.S. Treasury Department rebuffed last week. That put the focus on whatever support the industry can win from the incoming White House after Tuesday’s presidential vote, people familiar with the talks have said.
A trade group representing U.S. auto parts suppliers on Monday urged the Bush administration to create a new loan guarantee program for the industry, adding to the chorus of industry backers calling for urgent government aid.
Chrysler sales chief Jim Press said he expected that it could take another year and a half before automakers started to see substantial sales gains, but held out hope that October would represent the low-point of the downturn.
“At some point you have to sort of hit the bottom of the bathtub and in October we may have got there,” he said. “We now think the future won’t be any worse, and it may be better.”
Sales were expected to fall by at least 10 percent in Germany, Europe’s largest economy, when official figures are released.
Sales in Canada bucked the downtrend, edging up by 1.5 percent to 122,711 vehicles, boosted by price reductions.
Additional reporting by Soyoung Kim and Poornima Gupta in Detroit, Gilles Castonguay in Milan; Editing by Gary Hill and Carol Bishopric