Auto sales for '08 may have plunged 3M vehicles

Written by Sharon Silke Carty, USA Today

Auto sales likely dropped a breathtaking 3 million vehicles in 2008, the largest decline since 1974, said Ford Motor's head of sales analysis Friday.

The last time sales fell that much, the country was embroiled in the 1973 to 1974 oil embargo crisis, with drivers lining up outside gas station waiting for fuel.

The 2008 forecast Friday from George Pipas, manager of sales analysis for Ford Motor (F), comes just days before the auto industry is set to release December sales figures that will close out a disappointing, and sometimes shocking, year. Sales ended 2007 at 16.7 million, and many in the industry had projected the first half of 2008 would be slow and the second half would improve.

Instead, sales in the first half of the year now look positively rosy. Although gas prices constrained SUV and pickup sales, it wasn't until the banking crisis hit this fall when auto sales really fell off. Monthly sales in the fall didn't even hit 1 million, which hadn't happened since 1992.

December sales could be equally disappointing. Pipas says he's expecting sales to come in at 10.6 million on an annualized rate, which would be a 35% to 40% drop from December 2007. And sales in the first few months of 2009 could be just as dismal.

"We are not looking for first-quarter overall U.S. sales to be much different than the fourth quarter," said Pipas, speaking to reporters over coffee at a Border's book store near Ford's headquarters. Ford was closed for two weeks over the holidays.

But dealer showroom traffic went up dramatically in the last week of the month, consumer website Edmunds.com reported Friday. Dealers said they did 40% of their business during the last week of the month thanks to an influx of customers.

"Normally, I would say that such an increase in the last week of December is just at the high end of the usual seasonal pattern, but in the current environment, I would say that it is dramatically good news," said David Tompkins, Edmunds.com senior analyst.

Ford has been attempting to match its production levels with actual demand - a strategy that sounds simple but is tough to put into action. Earlier in the year, when truck sales fell off, Ford reacted by slashing production of the F-150 and postponing the release of the newest version of the truck. But Pipas says the company overcorrected and is planning to increase F-150 production in the first quarter, even though demand isn't expected to pick up significantly.

Pipas says the automaker expects sales to be about the same in the first quarter of 2009 as they were in the last quarter of 2008; that is to say, they'll be pretty bad. He says Ford expect there to be a very mild uptick in sales by the end of 2009.

One analyst is predicting December sales will be even worse than most people already expect. Brian Bethune, economist for IHS Global Insight, says December sales could hit 9.5 million on an annual rate, lower than the 10 million to 10.5 million many are expecting.

Even though the bailout was approved in December, "these developments came too late to impact December sales," he says. "Moreover, we see the all-time low consumer confidence readings as a sign that auto sales continued to drop in December."