Tight credit, fear send Sept. auto sales below 1M

[October 02, 2008]  DETROIT (AP) -- U.S. auto sales dropped below 1 million last month for the first time in more than 15 years as some consumers struggled to get financing and others were frightened away from showrooms by bank failures and turmoil on Wall Street.

Americans bought 964,873 vehicles in September, the lowest sales figure since February 1993, according to Autodata Corp. and the Edmunds.com automotive Web site. Sales fell 27 percent compared with September 2007, with every major brand but General Motors Corp. reporting drops of at least 24 percent.

"It was tantamount, really, to a natural disaster," said George Pipas, top sales analyst for Ford Motor Co., which saw sales slide 34 percent, its worst month of the year.

GM, buoyed by its offer of employee pricing on most of its models, said Wednesday that it sold 16 percent fewer vehicles than it did a year earlier. But executives were happy with the performance given the market conditions, which nearly all automakers said were influenced by tighter credit standards knocking buyers from the market.

"A few years ago I'd have jumped out the window with these numbers, and we're on the 39th floor here," Mark LaNeve, GM's vice president of North American sales, said in a conference call from the automaker's downtown Detroit headquarters.

Even Toyota Motor Corp., whose fuel-efficient offerings led to strong sales earlier this year, saw a decline of 32 percent, with the top Japanese automaker blaming the drop on the overall economic conditions.

Many dealers have said customers are having an increasingly hard time qualifying for loans to buy autos, as banks have restricted lending because of widespread mortgage defaults that led to disruptions in the financial markets. Plus, several automakers' finance arms have limited or discontinued leasing.

Unlike other automakers, Toyota officials said its finance arm has a strong ability to provide credit, so that did not cause the sales decline. But a lack of consumer confidence did, they said, especially late in the month.

"The last 10 days of the month are typically the best, and we saw the traffic steadily decline to extremely low levels in the last couple of days," said Bob Carter, group vice president and general manager of Toyota Division in the U.S.

"I think consumers are waiting on the sidelines to rebuild some confidence and get back out into the market," he said.

At Chrysler LLC, sales tumbled 33 percent for the month, while even Honda Motor Co., one of the few automakers that had posted sales growth through August, reported a 24 percent drop.

Mike DiGiovanni, GM's executive director of global market and industry analysis, said it is critical for Congress to approve the government's $700 billion bailout plan to free up credit for car buyers and small businesses.

GM said earlier that tighter credit requirements cost it 10,000 to 12,000 sales per month during the first half of the year, and that number probably grew in August and September.

Passing the bill would ease consumer and business fears of the economy worsening, he said.

"The psychological impact is of particular importance here," he said. "We need to break that cycle. The only way I know to do that is to pass this legislation."

GM's market share in September grew to just over 29 percent, compared with 23 percent through August, mainly because of the employee pricing offer that expired Tuesday. The offer generally gives people 10 percent off dealer invoice prices, but LaNeve said GM averaged only $100 more in incentives per vehicle than in August. Incentive spending was reduced, he said, because GM did almost no leasing during the month.

September's seasonally adjusted annual sales rate was 12.5 million vehicles, according to Autodata, down a stunning 3.7 million from the rate of September 2007. The rate shows what sales would be if they continued at the same pace all year, with adjustments for seasonal fluctuations.

Buyers continued to favor cars over trucks and sport utility vehicles, with car sales taking 52 percent of the market.

Sales of Ford's F-series pickup trucks, traditionally the top selling vehicle in the U.S., were down almost 42 percent for the month.

But Pipas said full-size pickup truck sales were better industrywide when compared with May levels, due largely to increased incentive spending. He also said used car values have improved on pickup trucks and SUVs since May, putting many customers in a better position to trade in vehicles.

Ford, like its U.S.-based competitors, has been trying to shift its factories and model lineup from trucks and SUVs to more efficient cars and crossover vehicles, while burning through billions of dollars in cash. The Dearborn-based automaker has mortgaged its assets to stay in business and, as of July, had burned through nearly $11 billion of its cash stockpile in the past year.

GM has performed strongly overseas, but plummeting demand for its most profitable products in the U.S. has forced it to close factories and lay off workers, and it burned through $3.6 billion in cash in the second quarter alone.

Ford shares fell 65 cents, or 12.5 percent, to close at $4.55 Wednesday, while GM shares closed unchanged at $9.45. Toyota's U.S. shares fell $1.90, or 2.2 percent, to close at $83.90, Honda's U.S. shares lost 51 cents, or 1.7 percent, to close at $29.60, and Nissan's shares dropped 51 cents, or 3.8 percent, to $13.08.

The Associated Press reports unadjusted auto sales figures, calculating the percentage change in the total number of vehicles sold in one month compared with the same month a year earlier. Some automakers report percentages adjusted for sales days. There were 25 sales days last month, one less than in September 2007.

[Associated Press; By TOM KRISHER and BREE FOWLER]

AP Auto Writer Bree Fowler reported from New York.

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