U.S. Auto Sales Fell 36% in December
Declines Expected To Continue in '09

By Kendra Marr
Washington Post Staff Writer
Tuesday, January 6, 2009

The auto industry capped off 2008 with its worst sales in 16 years as Americans continued to steer clear of dealerships in December, according to sales figures released yesterday.

Industry-wide, automakers sold 896,124 new cars, minivans and trucks in December, a drop of 36 percent compared with December 2007, according to preliminary data released yesterday by the industry research firm Autodata.

Sales at General Motors, Toyota, Ford, Chrysler and Honda -- the U.S. auto market's five largest manufacturers -- all fell sharply in a month when recession fears grew and domestic automakers sought help from Congress to avoid financial collapse. GM said sales were down 31 percent. Ford's sales plummeted 32 percent, Toyota's fell 37 percent, and Chrysler's sales dropped 53 percent. Honda's sales slid about 35 percent in December.

For the entire year, U.S. sales totaled 13.24 million in 2008, down about 18 percent, according to Autodata, and the fewest U.S. sales since 1992.

Industry executives attributed the poor sales to the economic downturn. The housing crisis sideswiped automakers, as consumers watched their wealth vanish with falling prices. Then the credit markets froze, making it difficult for buyers to get auto loans. By the end of the year, consumers had begun to hunker down, fearing a prolonged recession. Even lower gas prices and generous end-of-the-year discounts could do little to lure them into showrooms.

The sales drop hit a wide variety of models. Annual sales of the hybrid Toyota Prius fell about 45 percent compared with 2007, just as sales of the more traditional Ford Taurus sedan dropped 46 percent.

"There is business out there, but the business has been reduced, first and foremost, because consumers are concerned about their employment status, their prospects for income growth, whether they are going to get a raise or not or whether they are going to have a job or not," said George Pipas, Ford's U.S. sales analyst. "And I think that's going to continue to weigh on consumers in the first quarter."

GM's sales totaled just under 3 million for the year, down 23 percent from 2007. Toyota's annual sales dropped 15 percent, to 2.22 million. Ford's sales fell 21 percent, to nearly 2 million vehicles. Chrysler sold 1.45 million units, a 30 percent decrease, and Honda's sales totaled 1.43 million units, an 8 percent decrease.

"It was a period we were really discovering, confronting and adjusting to a lot of new realities," said Jim Press, Chrysler president and vice chairman.

GM took solace from holding on to the No. 1 position in the U.S. auto market in a turbulent year.

"Despite some of the things that came out in the discussion with Congress about Americans not wanting to buy American vehicles, I would say this data puts that to rest," said Mike DiGiovanni, GM's executive director of global market and industry analysis.

GM shares rose about 2 percent, to close at $3.71. Ford stock increased about 5 percent, to $2.58. Toyota's American depositary receipts dropped about 1 percent, to $65.62, and Honda's fell 2 percent, to $21.37.

The industry is bracing for even weaker sales this year. Emily Kolinski Morris, Ford's senior economist, said the first quarter is going to be "bad, no matter how you look at it."

"We expect the first several months of 2009 are going to feel very much like the last few months of 2008," she said.

December was filled with hefty incentives and big advertising campaigns to woo consumers back to showrooms. Many of these enticements are continuing this year to boost sales.

"These are tried-and-true ways they use to finish off the year and extinguish any prior-year inventory," said Michael Robinet, vice president of global forecast services for CSM Worldwide.

General Motors is offering financing at as low as zero percent interest for up to five years on select new cars.

South Korean automaker Hyundai, which posted a 48 percent sales decline in December, launched a program yesterday that will allow people to return their cars free if they lose their jobs and can't make payments. Covering up to $7,500 in depreciation within a year of purchase, the program aims to address financial woes such as unemployment and disability.

Cutting more costs, Chrysler yesterday announced plans to scale down its Hollywood theatrics at the annual North American International Auto Show next week. In 2007, the company showed off its new Dodge Ram by driving more than 120 steer through the streets of Detroit. This year the company won't even be hosting the media; Chrysler executives must purchase their own tickets to the show's charity ball.

"Less glitz and no giveaways," blogged Rick Deneau, director of product, brand and sales communications. "These are unfortunate but necessary steps to help return Chrysler to a solid footing. And with the government loan to help Chrysler bridge the financial crisis, it's the right thing to do."

But there is only so much automakers can do to reverse their financial distress, Robinet said. They will need the government to step in, he said, to improve "the two C's: credit and confidence."

Domestic auto executives expressed their hope that the Obama administration would create a stimulus package that would help lift auto sales in the second half of this year.

But Chrysler's Press was quick to correct the notion that they might need additional government aid.

"We're not counting on it," he said. "We're ready to operate in this environment."