Credit Turmoil Is Likely To Crimp U.S. Auto Sales
By TERRY KOSDROSKY and JOHN FLOWERS
Wall Street Journal
March 19, 2008; Page A11
The following article was also posted online at www.leasetrader.com.
Research firm J.D. Power & Associates slashed its forecast for U.S. auto sales this year to what would be the lowest level since 1994, and blamed a softening economy for keeping consumers away from car lots.
If its scenario plays out, auto makers could face even bigger headwinds as they try to turn around their North American operations. It also came after General Motors Corp. reaffirmed its expectations for a second-half rebound but acknowledged that its outlook could change if economic troubles persist.
J.D. Power cut its forecast for new-vehicle sales in the U.S. by 4.8% to 14.95 million and said that the sales market will weaken further in the second quarter before beginning a rebound. J.D. Power's prior 2008 sales forecast was 15.7 million vehicles. Sales of about 16 million vehicles is considered a healthy level.
Auto sales were expected to be weak this year because of the economic climate and few attractive new models. Delinquencies on auto loans have been increasing, and the credit crunch has tightened lending standards.
The market-research firm, while noting weaker sales in January and February, said much of the reduction in outlook was due to slumping consumer confidence and persistent turbulence in the economy.
Retail sales are now seen totaling 12.3 million vehicles this year, down from the old forecast of 12.6 million and from 2007 sales. J.D. Power said that "general economic conditions, coupled with less widespread incentives, are driving the retail decline." Fleet sales -- sales to car-rental companies and corporate and government fleets -- also are expected to be under pressure.
GM Vice Chairman Bob Lutz said yesterday the company is sticking by its forecast for a sales uptick in the second half of the year, but may have to revisit that claim.
"If we can stabilize this thing, I think we're still OK for some growth in the second half," Mr. Lutz told reporters in Washington. "However, when you're in the midst of a period of heavy turmoil like we've had for the past couple of weeks, the situation becomes more unpredictable. Right now, I would say we just have to sit out the next two to three weeks and see what happens."
Chrysler LLC Chairman and Chief Executive Bob Nardelli said that the auto maker, now owned by private-equity firm Cerberus Capital Management LP, didn't include a second-half rebound when it put together its 2008 plan.
"We did not build in, you know, the traditional hockey-stick approach that is kind of common within Detroit and the other manufacturers," Mr. Nardelli said in an interview with CNBC yesterday. He added, "We faced the reality of the economy."
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This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com