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DATE News (chronologically)
01/01/08
industry news
2008 car sales may get worse
Industry analysts predict a lackluster end to an already dismal year for automakers, likely the worst in nearly a decade.

Holiday discounts failed to bring consumers out of their funk, and December sales are expected to fall around 4%, which would bring the full-year total for U.S. auto sales to 16.1 million vehicles, the lowest volume since 1998.Sales have been hurt by consumer anxiety over gas prices, the housing crunch and the overall weakening economy.

Industry watchers warn that the 2008 auto sales performance could be even weaker.

"A lot of these economic issues are continuing to put more pressures on the economy and the consumer as time goes on," said Erich Merkle of IRN Inc. In 2008, "most of the weakness is going to come in the first half or perhaps the first nine months of the year. So there is not going to be much to write home about."

Bear Stearns analyst Peter Nesvold said in a recent note to investors that he is even more concerned about 2008 sales than he was a year ago, since consumer sentiment and employment levels are deteriorating. Nesvold said the country hasn't seen a meaningful downturn in auto sales in 15 years and is long overdue for one.

"In a nutshell, if consumers don't feel good about the world or employment is slipping, they tend to delay major expenditures such as a new house or car, if possible," he said.

December is Ford Motor Co.'s last chance to hold on to its longtime position as the No. 2 automaker by U.S. sales. Toyota Motor Corp., which outsold Ford by 15,000 vehicles in November, is on track to overtake Ford this year. Toyota leads in sales through 11 months by nearly 50,000 vehicles.

In other sales races:

• Chevrolet is poised to seize the spot as the top-selling brand.

• The Honda Odyssey is set to finish the year as the top-selling minivan, stealing the crown from the Dodge Caravan.

• Ford's F-Series and Toyota's Camry appear on track to remain the top-selling truck and car nameplates.

Robert Barry, an auto analyst with Goldman Sachs, predicts Ford's sales will fall 3% in December compared with a relatively weak December 2006. Barry said Ford is struggling because it's at a low point in its product cycle, with a major redesign of the F-150 pickup and a new crossover not due until next year. In the meantime, it's being hurt by aggressive incentive spending by Toyota and other rivals.

Nesvold predicts Ford's sales could fall as much as 12% in December, pointing out that the automaker's newly rebadged Ford Taurus and Mercury Sable sedans and Taurus X crossover have seen disappointing results all fall. But Nesvold said the Ford Edge crossover and Ford's smaller SUVs have held up well.

General Motors Corp. could see an even sharper decline of 14% because of a planned cutback in sales to rental fleets, Barry said. In a note to investors, Barry said he expects GM to cut fleet sales by 30% in December, the same amount the automaker cut fleet sales in November. The automaker has repositioned its Malibu sedan as a true consumer car. Ford also has been slashing sales to rental fleets all year to shore up resale value and brand image.

Barry said Chrysler LLC will likely see double-digit drops in December, particularly since the automaker's car sales shot up 48% last December thanks to brisk sales of the Chrysler Sebring and 300 sedans. Chrysler's newly redesigned minivans could significantly boost December sales, Nesvold said. But if they don't, analysts may have to lower their expectations for the vehicles.

Japanese automakers also are expected to see lower sales in December, particularly as the housing crunch dampens demand in California, their most important market.

Jesse Toprak, chief economist for the auto information Web site Edmunds.com, predicts Toyota's sales will be down 3% compared with last December -- before sales of the Prius gas-electric hybrid kicked off a 70% sales surge -- while Honda Motor Co.'s will fall 1%. Nissan Motor Co. will likely be flat, he said. Nissan has bucked the slow sales trend in recent months on the strength of its new Rogue crossover and Versa subcompact.

"Given the current economic challenges and the uncertainty associated with the upcoming presidential election, we do not anticipate that 2008 will be any more robust for the car business," he said.  Detroit Free Press

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