New figures reveal America’s car sales slump deepened in November after October’s disaster. General Motors was especially badly hit, so no wonder it wants an $US18 billion loan from the US Government; Ford was hurt as well and wants $9 billion, Chrysler wants $US7 billion.
That’s $US34 billion in all, compared to the original offer from Congress of $US25 billion. Looking at the November sales figures, it’s no wonder.
GM said its current financial state was so fraught, it needed $US4 billion immediately to avoid bankruptcy. Apart from some window dressing on salaries and private jets, that announcement was the most dramatic point to come out of the plans from both ailing giants.
Early returns suggest US car sales fell 34% last month, worse than the shock 32% drop in October. Ford, GM, Chrysler, Toyota and Honda all reported drops of more than 30%. The annual sales figure rate this month will be around 10.6 million units this year, down from 16.8 million in 2007.
GM reported a 41% drop from a year earlier and a 9% decline from October’s sales. Sales of light trucks tumbled 39%, while cars had a staggering 44% fall; Chrysler reported a 47% drop from a year ago and a 10% decline from October. Ford said November sales plunged 31% from November 2007 and sales were also down 7% from October.
The real surprise was the slump in sales for Toyota and Honda.
Toyota said its sales fell 34% from last November and 14% from October; Honda reported a 32% drop in sales on last year and sales were down 11% from October.
GM wants more cash than it currently has on hand (less than $US16 billion). Ford is in a better position, but its $US9 billion request would see it continue with certainty until well into 2010 when the expected recovery comes — if it comes at all. Between them, the two companies would absorb more than the $US25 billion on offer.
GM said it is seeking up to $US12 billion to survive into 2010 and that it anticipates using $US4 billion of that just this month to avoid bankruptcy. It also asked for an additional $US6 billion line of credit to provide more funds should a severe market downturn persist. Seeing as its recovery plan is based on a 12 million vehicle sales year in 2009, there’s every chance that could be called on, given the extent of the slump in demand now and expected in the first quarter.
Chrysler repeated the $US7 billion request of two weeks ago in its filing with Congress this morning. Chrysler still has to resolve the outstanding stake held by Daimler and what happens to the 51% of GMAC owned by Cerberus, which owns the other 79.8% of Chrysler.
The CEOs of GM and Ford have offered to work for $US1 a year and both companies said they would get rid of their contentious private jets. The three executive groups drove 800 kilometres from Detroit to Washington on Monday night and Tuesday morning. No quick flit jet incursions into the mire of Washington this time, something which undid their requests last month.
GM said it believed industry-wide US car and light truck (SUV) sales fell by 400,000 vehicles, or 34%, from a year ago, which would be well below even October’s total.
Toyota’s position has worsened appreciably in the past few weeks; seeing as it’s the market leader in Japan, and very big elsewhere, it was hit hard by the 27% slump in car sales in that country last month (sales in South Korea also fell 27%). Honda and Nissan Renault were also slugged.
Toyota is cutting bonuses for its 5000 top managers by 10% and has scheduled a press conference next week where it’s expected to reveal lowered sales estimates for 2008 and calendar 2009. It has already slashed its 2009 earnings estimate by around 60% and expected to earn just $US200 million in the six months to the end of March. Given the slump in Japan and the US last month, that is now in doubt.
Honda has already warned it may lose money in the March half.
GM and Ford also announced big cuts in first quarter production for 2009: they are not waiting for sharply lower petrol prices to boost demand, they are cutting and cutting deeply. GM will hack its US first quarter production by 32% to 600,000 vehicles, while Ford will slash production by 38% to 430,000.