The global credit freeze extracted a terrible toll on global manufacturing, led by the US car industry which saw its worst month of sales for a quarter of a century in October. In fact the struggling General Motors described it as the worst month for sales since the end of the Second World War, or for 63 years.
US car sales crashed in October, falling by more than even the most pessimistic commentator had forecast: the fall exceeded September’s industry changing 27% slump, led by a 45% collapse by General Motors. The news came the same day as a survey was released showing that US manufacturing fell to its lowest level in decades last month; part of a global trend that saw manufacturing in Australia, China and Europe worsen in the same month.
According to the Autodata research group, total US new vehicle sales plunged a huge 31% to 838,156, compared with over 1.2 million in October 2007. That’s an annual rate of 10.56 million units, down from 16.04 million a year earlier and the annual rate of 12.5 million in September.
In fact while car sales were the worst in 25 years, US manufacturing fell to a 26 year low, thanks to the slump led by the automotive sector. And a senior member of the US Federal Reserve, Richard Fisher, head of the Dallas Fed, forecast no growth in the economy next year and colourfully told Bloomberg: “The credit crisis reached up and grabbed the throat of the global economy and choked off economic growth.”
The plunge in car sales came despite further falls in the cost of petrol, now down 41% from the peak of $US4.11 a gallon and trading around $US2.46 a gallon. GM’s sales plunge exceeded worrying falls from other major producers, Ford, Toyota, Chrysler and Nissan.
In fact the figures suggest that October’s figures were the worst in a quarter of a century and the annual rate of sales fell to an annual rate around 10.7 million: down sharply from the 12.5 million annual rate in the slump in September.
The last time car sales were at this level was back in 1983.
Ford, the second-biggest U.S. automaker, said in a statement that its sales declined 30% from a year earlier. Toyota posted a 23% drop, and Nissan’s slid 33%. Honda saw its sales fall by almost 29,000, or just over a quarter, to 85,864 units, a result that was “good” compared to the competition.
Chrysler which includes the Chrysler, Dodge and Jeep brands, posted a 35% drop in sales and was one of the few automakers to report a rise in sales from September.
Chrysler sold 94,530 vehicles, a drop from 145,316 a year earlier.
GM’s fall stunned US analysts and the company, as the company’s North American marketing boss, Nark LaNeve said in the company’s statement:
“The carnage was completely widespread” in the industry, he said on a conference call. “In my 27 years, I never saw a month like this.”
In the company’s statement he said:
If you adjust for population growth, this is probably the worst industry sales month in the post-WWII era…
The market has been shrinking for three years, but in October we saw a dramatic decline for the industry and GM.
More importantly, it also reflects an unprecedented credit crunch that is dramatically impacting the entire U.S. economy — from the housing market to big and small companies to banks to family run businesses.
The credit freeze has also had a very negative impact on consumers’ confidence and their purchase behavior across America.
We believe there is considerable pent-up demand from the last three years, but until the credit markets open up and consumer confidence improves, the entire U.S. economy, and any industry like autos that relies on financing, will suffer.
General Motors dealers in the United States delivered 170,585 vehicles in October, down 45 percent compared with a year ago. GM truck sales of 97,119 were down 51 percent and car sales of 73,466 were off 34 percent. The steep decline in vehicle sales was largely due to a significant drop in the market’s retail demand as uncertainty over the deepening credit crisis impacted consumer confidence.
GM’s performance will add pressure to complete a merger with Chrysler, which has suspended talks with the Nissan/Renault group of Japan and France. But US media reports yesterday suggested that the American Government has rejected approaches from GM to finance part of all of the merger by way of loans from the $US700 billion bailout fund.
Ford’s sales dropped to 132,838 cars and trucks, from 190,195 a year earlier. The slide was Ford’s 23rd in the past 24 months.
Toyota reported sales of 152,101 vehicles, down from 197,592 a year earlier. Adjusted for the change in sales days from a year earlier, the decline was 26%, Toyota said.
Nissan’s sales fell to 56,945 vehicles.