Wednesday, October 15, 2008

Auto sales slowdown continues in October

October is shaping up to be as miserable a month for automakers as September, according to industry analysts, as lenders tighten financing standards and many consumers steer clear of showrooms because of the weakening economy.

Tom Libby, senior director for industry analysis at J.D. Power & Associates' Power Information Network, which monitors car sales on a weekly basis, said sales in the first week of October were "very, very weak," much like in September, when industry sales sank to a 15-year low.

Plummeting sales mean Detroit's automakers are burning through their cash reserves faster, forcing them to consider ways of maintaining enough liquidity to weather the downturn. GM, for example, has been in talks with Chrysler about a possible merger for about a month. The industry's woes have extended beyond Detroit. Toyota is trying to help October sales with no-interest financing offers on 11 models after September sales fell 32 percent.

But those deals, and the myriad other big discounts available right now, appear to be doing little to stimulate sales., a Web site that gives car-buying advice to consumers, said the number of visitors who intended to purchase a vehicle soon was 20 percent lower in early October than in early September. That is double the usual decline going into October, which is among the worst months for automakers.

One analyst, Rod Lache of Deutsche Bank, estimated Tuesday that October sales would be down 30 percent to an annualized rate of 11 million vehicles, a rate last seen in 1983. He projected GM's sales to be down as much as 50 percent after its employee discount sale ended in September.

"Developments in the credit markets will have broad negative implications for auto sales in the months ahead," he wrote in a note to clients.

Vehicle sales in the U.S. fell 27 percent in September, making it the first month since 1993 when buyers drove fewer than 1 million new cars and trucks off dealership lots.

"The economy continues to weaken, and the job market is continuing to contract," said George Pipas, Ford Motor Co.'s chief sales analyst. "Our expectation is that as we move to the fourth quarter that we'll see sales rates similar to what we saw in the third quarter and in September."

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