Auto sales for September may be the worst in a decade. Automakers report September sales results on Wednesday, Oct. 1, and almost no one in the industry expects good news.
A scan of news reports today indicates that tight credit markets and consumer uncertainty are expected to crush an already flat auto market.
Edmunds.com predicts new-car sales to drop 19.7 percent compared with September 2007. Chrysler LLC may suffer the worst drop in recent memory, down 36.5 percent from 2007 September figures, Edmunds says. Ford Motor Co. sales could be down 25.1 percent compared with September 2007, and General Motors could drop 23.9 percent.
The average forecast is for U.S. auto sales to drop to a 13.5 million annual rate in September from a 16.2 million rate a year earlier and down from a 13.7 million rate in August, according to contributions from economists to Reuters.
The annualized sales rate is a key U.S. economic indicator and one of the earliest pieces of information economists will get to gauge the impact on big ticket item sales since the credit crisis began and the government embarked on an effort to bail out the rapidly consolidating financial sector.
The forecasts for the annualized rate of sales ranged from 12.5 million to 14.1 million for the month.
From fuel to financing
Auto executives such as GM CEO Rick Wagoner have said September sales results would reflect a shift from rising fuel prices to troubles in the U.S. financial system. He expected the months sales to be about the same as August.
Loan rejections are rising, even for those consumers with the best credit. Auto dealers have confirmed the trend.
In the past we were accustomed to financing 70 to 80 percent of our cars sold, Jim Weisbecker, general manager for Belle Glade Chevrolet in Florida told Automotive News. Now we finance about 20 percent, if that. It has been a drastic turnaround.
The credit crisis also affects the ability of dealerships to keep cars on the lot because the finance arms of the Detroit 3 have tightened credit to dealerships, according to SmartMoney.
Unemployment jitters and tight credit are the explanations that Jim Fosche, sales manager at Buddy Foster Chevrolet in Zephyrhills, Fla., gave Automotive News for his dealerships 50 percent sales drop in September.
Even in the 70s when interest rates were at 18 percent, people were buying because people were working, Fosche said. Now, its very difficult.
Annual rate below 13 million?
Ford marketing chief Jim Farley said last week the industry rate was likely to be about 13 million in September, the approximate running rate the automaker expects for the rest of 2008 under the tight consumer credit conditions.
Some analysts expect the seasonally adjusted annual selling rate to be below 13 million vehicles. Citi expects U.S. auto sales at an annual rate 12.7 million, just above the 12.55 million rate in July that was a 16-year low.
Citi expects sales weakness across all the major automakers in September. GM may outperform Ford and Chrysler due to its employee discounts campaign, which supported sales in late August and extended through September, Citi said.
JP Morgan has also been looking for an annualized sales rate slightly below 13 million vehicles.
Reuters contributed to this report