General Motors Reports 45% Decline as Tight Credit and Financial Turmoil Put Squeeze on Consumers
By KATE LINEBAUGH and MATTHEW DOLAN
The dismal U.S. auto market took a turn for the worse in October, with sales plunging by about a third as the financial crisis and tightening credit kept buyers away from showrooms.
Auto makers sold 838,186 cars and light trucks last month, according to a tally by Autodata Corp. General Motors Corp. said it was the worst October in 25 years. When adjusted for increases in the U.S. population, last month was "the worst month in the post-World War II era," Michael DiGiovanni, GM's top sales analyst, said in a conference call. "This is clearly a severe, severe recession."
Auto executives warned that the market could deteriorate further, raising the question as to when the auto industry -- a key driver of the U.S. economy -- will hit bottom.
The modest decline in U.S. economic output in the third quarter "is not likely to be the worst we will see in this cycle," Ford Motor Co. economist Emily Kolinski Morris said in a company conference call.
A closely watched industry figure, the seasonally adjusted annualized selling rate, was 10.6 million vehicles, compared with 16 million a year earlier, according to Autodata.
Ford sales analyst George Pipas said the current sales trend could pull total 2008 sales below 14 million cars and trucks. At the beginning of the year many car companies had expected sales of roughly 15 million vehicles, already below the 16 million annual figure considered to be healthy.
Slumping auto sales are among the factors that have prompted GM to contemplate a merger with Chrysler LLC and spurred calls for federal help for the industry.
The National Auto Dealers Association last week urged President George W. Bush to offer tax credits to boost new-car purchases. The auto makers said Monday they need a policy response to help promote sales.
October's declines were led by GM, where sales fell 45% to 166,744 vehicles. The company was hurt when its financing arm, GMAC LLC, began offering loans only to customers with top credit scores. In many areas of the country, only a third or so of all customers would qualify for loans, Mr. DiGiovanni said.
Sales to fleet customers, like rental companies, made up a third of GM's total, meaning "retail" sales to individual consumers totaled only about 113,000 vehicles.
Other auto makers suffered major declines, too. Chrysler's sales fell 35% to 94,530 vehicles. About a third of the company's total was made up of fleet sales, a person familiar with the matter said.
Ford reported its sales fell 30% to 132,248 cars and light trucks, Toyota Motor Corp.'s fell 23% to 152,101 and Honda Motor Co.'s dropped 28% to 85,864. For Toyota, fleet sales comprise less than 10% of total sales.
The sharp contractions came as U.S. consumer confidence fell in October to its lowest level since the Conference Board, a New York research group, began keeping records in 1967. The stock market fell 14% last month.
Unemployment is expected to rise from its current level of about 6%. The auto industry alone has announced 10,000 layoffs in the last two weeks as production cuts continue.
With the economy contracting, auto makers are pushing forward year-end sales. GM's "Red Tag" sale will start Tuesday rather than in mid-November, as is customary. GM will offer as much as $7,250 off select 2008 and 2009 models. Toyota will extend its national 0% financing campaign through November.
Ford said it is likely to cut its output of cars and crossover utility vehicles even as it plans to ramp up production of pick-up trucks. "There are no hot segments or hot products," Mr. Pipas said. Even the red-hot Ford Focus, the small car that saw sales rocket this summer, has stalled out, with an 18% drop in October.
"In my 27 years, I have never seen a month like this," said GM sales chief Mark LaNeve. "It was like somebody turned off the lights in the month of October."
—Sharon Terlep and John D. Stoll contributed to this article.
Write to Kate Linebaugh at kate.linebaugh@wsj.com and Matthew Dolan at matthew.dolan@wsj.com
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