A lackluster November is only a hint of the challenges facing the U.S. auto industry in 2008, when many automakers and analysts predict sales could drop to their lowest level in a decade.
Automakers said Monday that November sales were down 2 percent industrywide as consumer confidence was rattled by high fuel prices and trouble in the housing market. General Motors Corp. and Ford Motor Co. cut scheduled production in the first quarter and Chrysler LLC said 2008 looks tough and it will review its production plans on a weekly basis.
“We are feeling it in our automotive business,” Chrysler’s vice president of sales Darryl Jackson said in a teleconference with media and analysts.
The November sales rate — which shows what sales would be if they remained at the same pace for a year — was 16.2 million vehicles, still relatively healthy compared to what automakers are forecasting for 2008. Ford’s top sales analyst, George Pipas, said the company is forecasting that rate could fall to as low as 15.5 million vehicles in the first six months of 2008. Global Insight analyst Aaron Bragman said Ford’s predictions may even be too rosy.
“We’ll see what happens, but thus far it’s not looking like a very positive sales year next year,” Bragman said.
November had its bright spots. Subcompacts like the Honda Fit, Nissan Versa and Chevrolet Aveo saw big increases, as did some crossovers. Honda Motor Co. and Nissan Motor Co. posted increases thanks to strong-selling small cars as well as redesigned sedans.
“Rising fuel prices and sliding home values delivered a one-two punch this month,” Jim Lentz, president of Toyota’s U.S. sales arm, said in a statement. “But the industry’s not down for the count. Demand for fresh, more fuel-efficient products continues to show strength.”
Overall, the industry was hurt by falling demand for trucks, which has been exacerbated by a sharp downturn in home construction. Truck and sport utility vehicle sales were down 7 percent in November, according to Autodata Corp.
GM, the biggest automaker by U.S. sales, said its November sales dropped 11 percent while Chrysler LLC said sales fell 2 percent. Ford and Toyota Motor Corp. both reported flat sales for the month. Honda Motor Co.’s sales were up 5 percent while Nissan Motor Co.’s sales rose 6 percent.
GM said it will cut scheduled first-quarter production by 11 percent, while Ford said it would cut scheduled production by 7 percent.
GM’s November truck sales fell 15 percent while car sales declined 4 percent. GM’s sales were down 6 percent for the first 11 months of the year.
Mark LaNeve, GM’s vice president of North American sales, service and marketing, said GM wasn’t competitive enough on its incentive spending for 2008 model year pickup trucks. He said the company wants to remain disciplined about incentives but could ramp up spending. Edmunds.com, the automotive information site, said GM spent an average of $3,136 per vehicle on incentives in November, lower than Ford and Chrysler but above its Asian rivals.
“We will make sure we vigorously defend our truck position,” LaNeve said.
But Pipas, at Ford, said even incentives aren’t moving pickups off the lot right now.
“The market is very tough out there in this category. Not even year-end clearance programs are really shifting the volume in this segment,” he said.
Ford’s November results ended a yearlong string of losses. Every month of this year, Ford’s sales compared badly to 2006, when it was still selling thousands of its old Taurus sedans to rental fleets. But Oct. 31 marked one year since the end of production of that sedan.
Pipas said the automaker is on track to cut rental-fleet sales by 143,000 in 2007, or more than 30 percent. Ford cut rental-fleet sales by 6 percent in November and plans to continue cutting in 2008, Pipas said. Sales to more profitable government and commercial fleets were up 25 percent for the month.
GM said it also took a hit in November by slashing sales to low-margin rental fleets by 29 percent.
Jesse Toprak, the chief economist for Edmunds.com, commended GM and Ford for cutting sales to rental fleets, since those sales can hurt brand image and resale values. In the past, Toprak said, GM was selling as much as 35 percent of its output to fleets, but that total is now around 26 percent.
“It’s really necessary for the long-term health of the business. It’s one of the hits you have to take to improve the bottom line,” he said.
Ford said its car sales fell 2 percent but truck sales rose 2 percent, largely on the strength of the Ford Escape small sport utility vehicle and Ford Edge crossover. Sales of the newly redesigned Ford Focus jumped 18 percent. Ford’s sales dropped 12 percent for the first 11 months of the year.
Toyota continued its drive to overtake Ford this year as the No. 2 automaker by sales, outselling Ford by nearly 15,000 vehicles. Toyota’s sales were flat for the month compared with last November, with a 4 percent increase in car sales — including a 109 percent jump for the hybrid Prius — offset by a 5 percent drop in sales of trucks and sport utility vehicles. Toyota’s sales increased 4 percent for the year.
Chrysler’s car sales shot up 41 percent, led by the new Sebring convertible as well as the Dodge Charger and Avenger. Those sedans helped lift Dodge’s car sales by 75 percent for the month, Chrysler said. But Chrysler’s truck sales were down 13 percent, and the company’s sales were off 3 percent for the year.
Honda’s car sales rocketed up nearly 20 percent on the strength of the new Accord sedan and the subcompact Fit, which saw sales double over last November. But the automaker’s truck sales fell 11 percent. Honda’s sales rose 3 percent for the first 11 months of the year.
Nissan said its sales rose largely on the strength of the new Rogue crossover and the Versa subcompact, which saw sales surge 67 percent. Nissan’s car sales increased 11 percent, but truck sales were flat. Nissan’s sales rose 6 percent for the January-November period.
Shares of automakers fell. GM dropped $1.22, or 4 percent, to $28.61 in trading Monday, and Ford shares declined 26 cents, or 3.5 percent, to $7.25. Toyota shares fell $1.53, or 1.4 percent, to $110.92. Shares of Nissan declined 23 cents, or 1 percent, to $22.67, and Honda shares dropped 92 cents, or 2.7 percent, to $33.49.
The Associated Press reports unadjusted 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 and 25 in November 2006.