"Cars Were a Bubble,
Just Like the Housing Market was a Bubble"

Auto sales continued slide;
GM had worst February since 1967

RICK HAGLUND / Ann Arbor News 3mar2009

DETROIT -- Auto sales continued their precipitous slide in February as rising unemployment and an unrelenting barrage of bad economic news scared consumers from spending on new cars and trucks.

In reporting dismal sales results Tuesday, automakers also said they weren't expecting an improvement any time soon.

"Americans are hunkering down and pulling in their horns," said Mike DiGiovanni, General Motors Corp.'s chief sales analyst.

GM reported its sales fell 53.1 percent last month, its worst February since 1967. The nation's largest automaker sold 126,170 cars and light trucks last month, down from 268,737 vehicles in February 2008.

Ford Motor Corp. said its sales fell 48.5 percent while Chrysler LLC posted a 44 percent decline from year-go sales.

Most foreign automakers saw their sales plunge as well. Toyota Motor Co.'s sales fell 39.8 percent, Honda Motor Co.'s sales dropped 38 percent and Nissan Motor Co. recorded a 37.1 percent decline in February.

Hyundai Motor Co., which is allowing buyers who lose their jobs to return their vehicles, saw sales dip 1.5 percent.

But one West Michigan Chrysler dealer said his new-vehicle sales rose 20 percent in February compared to the year-ago period because of incentives of as much as $10,000 a vehicle offered by Chrysler.

"The No. 1 thing we're hearing is a buy-American sentiment," said Scott Comar, general manager and vice president of Harold Zeigler Chrysler-Dodge-Jeep in Grandville. "The number two thing is, 'How do you not afford to buy a car.' "

Chrysler's average incentive per vehicle hit a record $5,566 in February, according to Edmunds.com, an auto-buying information service in Santa Monica, Calif.

Overall, industry sales fell 41.4 percent last month from a year ago, according to Autodata Corp. in Woodcliff Lake, N.J.

GM and Ford also announced they're slashing production in the second quarter of this year, indicating they don't expect sales to improve much until at least later this summer.

Ford said it will cut second-quarter production by 38 percent, while GM announced it will cut production 34 percent compared to the same period a year ago.

Those production cuts are bad news for suppliers, many of whom are already on the edge of bankruptcy because of sharply reduced parts sales to automakers in the first two months of this year.

GM is being kept alive by $13.4 billion in federal loans and is asking for as much as $16.6 billion more in loans.

The automaker must demonstrate its viability to the Obama administration by March 31 or face having to immediately repay its loans, which would likely force GM into bankruptcy.

Chrysler faces the same deadline on its $4 billion loan.

DiGiovanni said he's confident industry sales this year will hit the 10.5 million vehicle level GM forecast in its federal viability plan, even though February sales for all manufacturers came in at an annualized rate of 8.9 million vehicles.

But he said it could be years before the industry again sells 17 million cars and trucks annually as it did in the early part of this decade.

"Cars were a bubble, just like the housing market was a bubble," DiGiovanni said.

He and other industry officials were buoyed by a report Tuesday that showed the median age of passenger cars on the road hit a record level.

The report by Southfield-based R.L. Polk & Co. found the median age of a car in operation in the United States was 9.4 years.

And the scrappage rate for all light vehicles last year was 5.7 percent, the highest since 2002, according to R.L. Polk & Co.

Those figures indicate that pent-up demand for new vehicles may be rising and could pull the industry out of its current deep sales slump.

But Polk said consumer confidence must improve before a sales recovery can begin.

source: 18mar2009

Imported cars stored at Sheerness open storage area awaiting delivery to dealers. source: 18mar2009

Newly imported cars fill the 150-acre site at the Toyota distribution centre in Long Beach, California. source: 18mar2009

Unsold Cars Storage at Newark, New Jersey. source: 18mar2009

The open car storage areas in Corby, Northamptonshire, are reaching full capacity. source: 18mar2009

Hondas await export at a pier in Tokyo. source: 18mar2009