U.S. Auto Sales Probably Fell for 12th Month on Credit Crunch

By Bill Koenig

Oct. 31 (Bloomberg) -- U.S. auto sales probably fell for the 12th straight month in October, extending the longest slide in 17 years, as the credit freeze helped crush demand for General Motors Corp., Ford Motor Co. and Chrysler LLC vehicles.

Sales probably dropped at Asian automakers also, including Toyota Motor Corp., analysts said. Tight credit, falling consumer confidence and a weakening economy, the same forces that suppressed buying in September, slammed automakers this month as well.

``October had even more uncertainty,'' said Jesse Toprak, director of industry analysis for automotive research firm Edmunds.com in Santa Monica, California.

The financial crisis has dented stock markets worldwide and a $700 billion U.S. financial assistance package hasn't yet spurred renewed lending. New vehicles probably sold at an annual rate of 11.5 million in September, down 28 percent from a year earlier, based on a Bloomberg News survey of 21 analysts and economists.

That estimate is in line with projections by auto executives. October sales were running at about a 12 million annual rate, Troy Clarke, GM's president for North America, said in a video for dealers earlier this month.

Chrysler LLC Chief Executive Officer Robert Nardelli, in an Oct. 16 interview with CNBC, said vehicles sold at a 12 million rate in the first half of the month. Lack of credit for customers ``is the biggest challenge we face now,'' he said.

Projected Declines

The auto companies report sales Nov. 3. GM, the biggest U.S. automaker, probably will say deliveries dropped 43 percent in October, while Chrysler may post a 38 percent decline, based on the average estimates of three analysts. Ford may report a 36 percent drop.

U.S. industry sales may have fallen 25 percent to 35 percent this month, Jim Farley, Ford's worldwide marketing chief, told reporters yesterday at a plant in Dearborn, Michigan. He declined to comment on Ford's results.

A 12-month streak of declines in vehicle sales would be the longest such stretch since the 14 months that ran through December 1991, according to industry-research firm Autodata Corp. in Woodcliff Lake, New Jersey.

U.S. consumer confidence fell to the lowest level on record in October as stocks plunged and banks shut off credit. The Conference Board's confidence index tumbled to 38, less than forecast and the lowest reading since monthly records began in 1967, the New York-based research group said Oct. 28.

Trending Lower

``The all-time low level of consumer confidence in October was reflected in particularly poor showroom traffic,'' Barclays Capital analyst Brian Johnson wrote in a note published Oct. 29. ``Sales in the U.S. are shaping up much weaker than even last month.''

Money-losing GM and Chrysler are negotiating a merger, people familiar have said. Vehicle sales are plummeting as those automakers and Ford burn through cash.

October had 27 selling days, one more than a year earlier. That means some automakers will post unadjusted results about 4 percentage points higher than analysts' adjusted estimates.

Toyota this month has offered no-interest financing on 11 car and light-truck models. The move may have lessened the Tokyo-based automaker's October decline, allowing it to grab a bigger piece of a shrinking market.

``Toyota, due to the promotion, will claim record market share in the U.S.,'' said Toprak of Edmunds.com. The automaker's current high mark is the 18.4 percent share it snared in May, when Asian automakers outsold GM, Ford and Chrysler for the first time.

Higher Traffic

Jim Lentz, president of Toyota's U.S. sales division, said Oct. 9 that dealers in California, the unit's biggest market, had more customer traffic early this month.

``It's a little too early to tell'' whether zero-percent financing would boost deliveries, as sales through the first week about matched the September pace, he said an interview in York Township, Michigan.

GM offered employee prices to all customers in August and September. The incentive caused ``sales to be pulled ahead into September,'' said Tom Libby, a Troy, Michigan-based analyst at market-research firm J.D. Power & Associates. ``GM has struggled'' since, he said.

The Detroit-based automaker revived a program Oct. 22 that lets U.S. employees offer their discounts to other people. U.S. salaried workers may choose two people to receive the lower pricing. The program runs to Nov. 3 and can be combined with other incentives.

Negative Growth

Gross domestic product contracted at a 0.3 percent pace from July to September, according to a U.S. Commerce Department report yesterday. The decline, the biggest since 2001, was smaller than forecast.

Unemployment is at a five-year high of 6.1 percent and may rise to 8 percent by the end of 2009, according to Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York. Consumer borrowing fell in August by the most on record as banks tightened credit.

GM's 8.375 percent note due July 2033 fell 3 cents to 33 cents on the dollar, yielding 25.5 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Ford's 7.45 percent note due July 2031 was rose 1.35 cents to 34.75 on the dollar, yielding 21.8 percent.

Chrysler is 80.1 percent owned by New York-based Cerberus Capital Management LP and doesn't report financial data.

The following table provides estimates for car and light- truck sales in the U.S. Estimates for companies are percentage changes from October 2007. Forecasts for the seasonally adjusted annual rate, or SAAR, are in millions of vehicles.

The SAAR average is based on forecasts from six analysts and a survey of 15 economists. The analysts' estimates are based on daily selling rates. October had 27 selling days.

Analyst                   GM       Ford      Chrysler   SAAR

Rod Lache                 -45%     -35%      -35%       10.8
(Deutsche Bank)
Brian Johnson             -42%     -36%      -39%       11.3
 (Barclays Capital)
Itay Michaeli             N/A       N/A       N/A       11.3
  (Citigroup)
Jesse Toprak              -43%     -37%      -40%       11.3
 (Edmunds.com)
Tom Libby                  N/A      N/A       N/A       11.3*
 (J.D. Power)
David Leiker               N/A      N/A       N/A       12.6
  (Robert W. Baird)


Bloomberg Economists       N/A      N/A       N/A       12
 (Average of 15 estimates)

AVERAGE:                   -43%    -36%       -38%      11.5

*Represents midpoint of a range.

To contact the reporter on this story: Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net