When August auto sales are reported today, they are expected to provide another sign that U.S. economic worries will challenge the auto industry for months to come, putting pressure on carmakers for further production cuts and profit-eating sales incentives.
U.S. consumers are too spooked about the housing market -- specifically, the value and marketability of their homes -- to be in the mood to buy new cars and trucks.
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The Consumer Confidence Index fell to 105 in the latest survey of 5,000 households from a 112 reading in July, the Conference Board said last week. That was the biggest month-to-month drop since September 2005, when hurricanes Katrina and Rita caused a spike in gas prices.
Few experts interviewed for this story expect consumer jitters to be easily calmed anytime soon.
"The correction is going to take us through 2008," said Paul Taylor, chief economist for the National Automobile Dealers Association, based in Virginia.
George Pipas, Ford Motor Co.'s top sales analyst, agreed: "We certainly see the conditions that we're experiencing now persisting well into 2008."
That likely will mean lower auto sales in the United States until 2009, several industry experts said, and two years of nearly a million fewer car and truck sales annually than automakers have grown accustomed to.
Since 1999, the auto industry has averaged 17 million vehicles sold each year in the United States. But with the deteriorating economic environment, Detroit automakers and industry analysts have been downgrading sales forecasts for this year.
Taylor, for example, expects about 16.1 million cars and light trucks to be sold, down from an earlier projection of 16.5 million. Last year, 16.56 million cars and light trucks were sold in the United States, the lowest level since 1998.
So far this year, sales are down 3.2%. Through July, 9.5 million vehicles were sold, compared with 9.9 million during the same period a year ago. Last month, for the first time, General Motors Corp., Ford and Chrysler LLC also sold fewer than half of the new cars and trucks in the United States.
Now, experts are starting to forecast auto sales volumes for 2008 that don't offer much comfort. Erich Merkle, director of forecasting at IRN Inc. in Grand Rapids, is forecasting sales of 15.7 million vehicles next year.
"I hate to say it, but for the most part I'm expecting it to be pretty weak for the rest of the year," he said.
Source: Free Press Business, 9/4/07
