Awful’ Month for Carmakers

By Sholnn Freeman
Washington Post Staff Writer
Wednesday, December 3, 2008; Page D01

Carmakers continued to load on the discounts in November, but American consumers continued to slam on the brakes.

The industry tried everything. Companies offered zero-percent financing, “red tag” sales, employee-discount pricing and even buy-one-get-one-free pickup truck deals. Still, U.S. auto sales plunged to their lowest pace in 26 years. Overall, automakers sold 746,789 cars, trucks and minivans in the United States, down 37 percent from a year earlier, according to Autodata.

All major carmakers suffered steep declines, but Detroit was particularly hard hit. General Motors’ sales tumbled 41 percent, to 152,552. Ford sold 118,319 vehicles last month, a 30 percent fall. Chrysler sold 85,260, down 47 percent.

Jesse Toprak, a sales analyst at Edmunds.com, said the incentive programs have reached a point of diminishing returns, where virtually no amount of cash on the hood will move sales. He said Americans harbor deep economic fears.

“The majority of the decline is low consumer confidence,” he said. “Consumers are not showing up regardless of what kind of deals, regardless of how low gas prices go.”

Toprak said middle-class and upper-middle-class Americans — who make up the market for new car buyers — are reeling from steep erosions in home values and losses in 401(k) plans.

“They don’t know if they are going to have a job in the next few months,” he said. “It’s a bit depressing when you put it all together. Consumers don’t want to make a big-ticket purchase, and cars are the biggest purchase after homes.” The sales figures were also hurt by would-be buyers’ inability to get financing, Toprak said.

November’s sales, translated into the closely watched seasonally adjusted annualized sales rate, or SAAR, slipped to 10.18 million, the lowest selling pace since October 1982, according to preliminary figures by Autodata. Sales appeared to slow from October, when the seasonally adjusted selling pace was measured at 10.56 million.

Economists and industry analysts yesterday were looking for signs that the market was close to bottoming out. Bob Schnorbus, the chief economist at J.D. Power and Associates, said he expected stronger November results from automakers. He said the industry was struggling to get out of “unprecedented territory” and that fourth-quarter results may represent the low point for the industry, barring other large-scale financial calamities.

“It’s probably getting pretty close,” Schnorbus said. “That’s kind of cold comfort if it turns out that the recovery is very weak and protracted.”

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