But while showrooms are busy, automakers are trimming payrolls and idling plants. Auto executives and analysts warn the sales spurt produced by cheap financing is masking serious long-term problems.
Analysts expect that October sales, which will be reported late this week, will be up around 15 percent from October 2000. That sales rate, on an annual basis, would equal about 20 million vehicles — a pace not seen since September 1986, when the annual sales rate reached 21 million units.
In both cases, the sales run was ignited by financing offers from General Motors. GM launched its 0 percent “Keep America Rolling” program after the Sept. 11 terrorist attacks. In late August 1986, GM dealt with bloated inventories with its “Big One” campaign offering 2.9 percent financing for 36 months. Chrysler countered with 2.4 percent financing for 24 months.
While the programs helped GM and Chrysler clear their lots in 1986, sales tumbled when the programs ended. Some auto executives and analysts believe that will happen again when current incentives expire.
“This can potentially hurt our bottom line for years,” said Wolfgang Bernhard, Chrysler group COO. “We are eating up our future.”
Against the backdrop of rising sales, the industry is making cutbacks and planning others.
DaimlerChrysler last week idled a 2.7-liter V-6 engine line its Kenosha, Wis., plant for two weeks. The engine is used in the Dodge Stratus, Chrysler Sebring, Dodge Intrepid and Chrysler Concorde. That followed a weeklong shutdown of that plant’s 3.9-liter V-6 engine line.
GM said it will lay off 850 workers for a total of four weeks in November and December at its Janesville, Wis., plant because of weak sales of commercial trucks.
At Ford Motor Co., the industry’s grim outlook prompted Ford CEO Jacques Nasser to say last week that he would not rule out plant shutdowns to reduce capacity. Ford already has said it will cut 5,000 white-collar jobs by the end of the year.
Moody’s Investors Service downgraded GM’s long-term debt rating to A3, from A2. Ford’s rating took the same drop two weeks ago.