Until now, one of the few bright spots in the economy has been car sales (and not coincidentally, manufacturing). Until now, auto sales have provided the Obama administration with a partial fig leaf on the utter failure of their policies to restore consumer confidence, create jobs, and extricate the US from the mortgage markets and the failures of Fannie and Freddie. Recently, Barack Obama used Ford as the backdrop of a speech to declare that the government intervention at GM and Chrysler produced a rescue of the domestic auto industry and pointed to restored sales as proof.
Unfortunately, according to Bloomberg’s forecasters, he spoke too soon:
U.S. auto sales in August probably were the slowest for the month in 28 years as model-year closeout deals failed to entice consumers concerned the economy is worsening and they may lose their jobs.
Industrywide deliveries, to be released tomorrow, may have reached an annualized rate of 11.6 million vehicles this month, the average of eight analysts’ estimates compiled by Bloomberg. That would be the slowest August since 1982, according to researcher Ward’s AutoInfoBank. The rate would be 18 percent below last year’s 14.2 million pace, when the U.S. government’s “cash for clunkers” incentive program boosted sales. …
While automakers increased discounts by 1 percent from July to an average of $2,864 per vehicle, sales to individuals probably fell 7 percent from last month, according to Santa Monica, California-based TrueCar.
Consumers are avoiding showrooms as fear of a double-dip recession grows following the 27 percent plunge in existing home sales in July, said Mike Wall, an analyst for IHS Automotive. The U.S. unemployment rate in July held at 9.5 percent, near a 26-year high of 10.1 percent. The Conference Board reported today that consumer sentiment rose to 53.5 this month from a five-month low of 51 in July. Fewer Americans said jobs were plentiful in August.
It’s worth noting that the auto companies have been maintaining sales through heavy discounting. That, and low-priced financing, has wrung most of the demand out of the market. The problem for auto retailers is the same one in the housing markets — not enough customers. High unemployment and the decline of economic indicators means people are unwilling to make large purchases until they see more security and clarity in the economic future.
Interestingly, Ford will come out ahead in this crunch by only dropping 5.2%, according to analysts’ expectations, in part by maintaining realistic inventories. That means fewer cars coming off the line, though, in the months ahead if the economy doesn’t start reviving soon. Chrysler will see an increase of 3% from last year, but only because the baseline for that comparison was almost non-existent. Analysts expect GM to announce a 19% decline in sales for this month when the reports come out tomorrow.
That’s not as bad as the Japanese auto makers in the US, though. Each of the three main manufacturers are expected to announce sales declines of over 20%, the lowest being 24% by Nissan. The market is collapsing on all brands, apparently.
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