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Dealerships Empty As Auto Sales Dive

Posted on: Tuesday, 4 November 2008, 09:10 CST

By Sharon Silke Carty

DETROIT -- Fearful consumers avoided auto dealerships in October, sending U.S. sales to their lowest levels in more than 25 years.

Industry sales plummeted 31.9% from a year ago, according to industry tracking firm Autodata. Automakers sold just 838,156 new vehicles in October, the second consecutive month below 1 million. Until then, monthly sales had been more than 1 million since February 1993.

General Motors says that, adjusted for population growth, U.S. sales were as low last month as they were just after World War II. Without government intervention, GM doesn't see a rebound.

"Bottom line, there really needs to be action (to loosen credit) to allow our country to pull out of this very, very bleak period," said Mike DiGiovanni, GM's chief forecaster.

Toyota officials say they would favor tax rebates for car buyers as long as they cover any brand.

Every major automaker saw significant declines last month. If new cars and trucks were sold all year at October's pace, sales would be just 10.6 million in a full year, according to a seasonally adjusted index the industry uses.

Last year, 16.1 million were sold. Even in the deep auto recession of the early 1990s, automakers sold more than 12 million annually. For the year to date, Autodata shows sales down 14.6%.

October sales fell even as automakers boosted incentives. The deals continue this month, but unless confidence in the economy improves, rebates and loan deals won't have much impact, automakers and analysts agree.

"We had such a collapse of confidence in the month that anyone who could postpone the purchase of a car certainly tried to," says Dana Johnson, chief economist for Comerica.

Tighter credit held back some of those who did want to buy. Historically, 96% of new-vehicle purchases are credit transactions, and credit is harder to get. Also, deflated home values mean people can't tap their home equity to borrow for a new vehicle.

One bright spot: High fuel prices earlier this year dampened sales, but gasoline has collapsed to less than $2 a gallon in some spots, and that could help in the months ahead.

The continued sales declines spell deepening trouble for auto dealers. Mark Johnson, a Seattle dealer consultant, said after September sales reports that 2,000 dealers could go out of business by the end of 2009. October results show the situation worsening.

"If auto sales continue at October's pace, which was the worst in recent memory for many dealers, there's no doubt that significantly more dealers will not make it through this downturn," he said.

In the long run, that could mean reduced competition and higher prices for car and truck buyers.

(c) Copyright 2008 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

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