'Consumer confidence is pretty fragile'

In the week after Standard & Poor's downgraded U.S. government debt, credit remained both available and affordable for the auto industry.

But even as automakers say they'll stay the course on production and sales for the rest of the year, consumer confidence remains a big worry.

In an unscientific Automotive News online survey of U.S. auto dealers, more than 70 percent of the 372 respondents said that, based on their sales and floor traffic, consumer confidence is down.

"The phones have stopped ringing, consumer confidence is low," one respondent wrote. Said another: "Several customers have told us they are going to hold off on buying because of drop in stock market -- six or seven of them."

"Consumer confidence is pretty fragile right now," Don Johnson, General Motors' U.S. sales chief, told analysts last week. "It's been ebbing and flowing throughout the year."

But, he added, "We know that there is continuing pent-up demand in the market."

Nicholas Stanutz, Huntington National Bank's senior executive vice president in charge of auto finance and dealer service, also said consumers are skittish.

"What most probably will change is consumer confidence," he wrote in an e-mail. "The stock market is deteriorating, eroding wealth."

He wrote that the economy is vulnerable and there is a "much higher probability of a double-dip now, so car sales will fall as a result."

Tom Doll, COO of Subaru of America, said the market plunge "appears to be an overreaction to the downgrade."

"At this time, we do not believe this is going to have any impact on our sales or production plans," Doll said.

Mike Jackson, CEO of AutoNation Inc., the nation's largest dealership group, agrees, citing the pent-up consumer demand that should have the industry on the right track in the fourth quarter.

"By October I think things will be booming," Jackson said. "It's all based on need."

Ford Motor Co. and GM said they are sticking by their full-year sales projections. Spokesman John Stoll said that Ford still expects U.S. industrywide sales to "come in at the lower end of the 13 to 13.5 million range, including medium and heavy-duty vehicles."

Separately, GM CEO Dan Akerson reaffirmed the automaker's forecast for total-industry light-vehicle sales of at least 13 million units this year -- sort of.

Said Akerson: "There's a lot of turmoil in the business, and turmoil means uncertainty, so we're a little unsure of these numbers."

The immediate effect on credit was minimal, but there was concern that the Standard & Poor's downgrade might be the start of a negative trend.

Dave Cosper, CFO of Sonic Automotive Inc., the nation's third-largest dealership group, pointed out in an e-mail that even after the downgrade, the U.S. rating of AA+ "is outstanding." But, he added, continuing downgrades would be worrisome.

"I think we could withstand another notch lower without a big impact," Cosper wrote. That would drop the U.S. government's rating to AA. "But if we go to AA-, that would be a problem."

Chris Ballinger, CFO at Toyota Financial Services, said his company's ability to attract quality investors and lend money cheaply is stronger than that of many major banks.

Toyota's cost of funds rose 5 to 10 basis points on Monday, Aug. 8, depending on the term of the loan. That compares favorably with major banks, which had increases of 50 to 100 basis points on longer-term credit default swaps, Ballinger said. One percentage point equals 100 basis points.

"In good times, dealers and customers borrow from many sources. But now this situation will benefit us," he said.

In fact, investors engaged in a "rush to quality" for Toyota commercial paper, which typically matures within two or three years, Ballinger said. "People are throwing money at us."

Mike Colias, Donna Harris, Diana T. Kurylko, Jamie LaReau and Mark Rechtin contributed to this report