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Auto Sales End Year With Lackluster December

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December 28, 2007 by   Leave a Comment

Industry analysts are predicting a lackluster end to an already dismal year for automakers, likely the worst in nearly a decade.
The Associated Press reported that holiday discounts failed to bring consumers out of their funk, and December sales are expected to fall around 4%, which would bring the full-year total for U.S. auto sales to 16.1 million vehicles, the lowest volume since 1998.
Sales have been hurt by consumer anxiety over gas prices, the housing crunch and the overall weakening economy.
Industry watchers warn that the 2008 auto sales performance could be even weaker.
“Given the current economic challenges and the uncertainty associated with the upcoming presidential election, we do not anticipate that 2008 will be any more robust for the car business,” said Jesse Toprak, chief economist for the auto information site Edmunds.com. Toprak said there is little promise for a turnaround until 2009.
Bear Stearns analyst Peter Nesvold said in a recent note to investors that he’s even more concerned about 2008 sales than he was a year ago, since consumer sentiment and employment levels are continuing to deteriorate. Nesvold said the country hasn’t seen a meaningful downturn in auto sales in 15 years and is long overdue for one.
“In a nutshell, if consumers don’t feel good about the world or employment is slipping, they tend to delay major expenditures such as a new house or car, if possible,” he said.
Robert Barry, an auto analyst with Goldman Sachs, predicts Ford Motor Co.’s sales will fall 3% in December compared with a relatively weak December 2006. Barry said Ford is struggling because it’s at a low point in its product cycle, with a major redesign of the F-150 pickup and a new crossover not due out until next year. In the meantime, it’s being hurt by aggressive incentive spending by Toyota and other rivals.
General Motors Corp. could see an even sharper decline of 14% due to a planned cutback in sales to rental fleets, Barry said. In a note to investors, Barry said he expects GM to cut fleet sales by 30 in December, the same amount the automaker cut fleet sales in November. Ford also has been slashing sales to rental fleets all year in an effort to shore up resale value and brand image.
Barry said Chrysler LLC will likely see double-digit drops in December, particularly since the automaker’s car sales shot up 48% last December thanks to brisk sales of the Chrysler Sebring and 300 sedans. Chrysler’s newly redesigned minivans could significantly boost December sales, Nesvold said. But if they don’t, analysts may have to lower their expectations for the vehicles.
Japanese automakers also are expected to see lower sales in December, particularly as the housing crunch continues to dampen demand in California, their most important market.

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