Bottom Line: 2008 Car/Truck Sales Probably Worst Since 1974

With holiday season here and gone, Detroit and DC are getting back to work. Time for a quick news round-up before things go crazy again. At least the Ford family's Detroit Lions aren't playing again until later this year.

All major automakers will release December and full-year 2008 sales data this Monday, January 4th. We'll post that information with our own analysis as soon as it becomes available, and we'll be looking forward to seeing your thoughts, too.
(GM's 2008 holiday card; if you don't work in the car business, where else would you see this?).

Ford's highly-respected chief analyst, George Pipas, told industry journal Automotive News he expects industry-wide December US auto sales to drop by about 35 percent from December, 2007, with no sign of a turnaround in the first quarter of 2009.

Pipas said 2008 calendar year sales figures will be around 13.2 million, down at least 3 million from 2007's 16.2 million.

The average vehicle price in 2008 was $27,958. A 3 million unit drop translates into an almost $84 billion loss.
(Have "lower" gas prices spurred sales of big trucks and SUVs again? Monday's sales figures will tell all).

Every carmaker selling cars and trucks in the US, whether they're headquartered in Highland Park or Stuttgart, Seoul or Tokyo, already feel the battering effect of these downward slides, as do all their suppliers. So will all their dealerships and their employees. And on and on and ...

The only other time the industry has seen a 3-million (or more) unit plunge was following the 1974 oil shortage.

There is some possible good news, though. On a full-year basis, Ford's Pipas said, 2008 is on track to become the first year since 2000 that passenger cars outsold light trucks (pickups, minivans and SUVs) in the United States.
(Porsche's first four-door, the Panamera, is due in the US in 2010. Slow US sales will seriously hurt Porsche, which sells more than 25% of their annual vehicle production in the US, possibly slowing the scheduled arrival of new vehicles from the company).

TARP NEWS

The Treasury Department is injecting $5 billion directly into dealer and buyer financing company GMAC, in exchange for stock paying an 8% dividend, and preferred stock paying a 9% dividend.

To try and spur sales, after getting the cash GMAC lowered the FICO score threshold for financing GM customers from 700 to 620.

This week also, Chrysler and GM confirmed each received $4 billion from the bailout fund used for the finance industry. It was originally stacked with $700 billion; less than half remains.

General Motors will receive, from DC's Troubled Assets Relief Program (TARP), a total of $13.4 billion in three chunks, including this week's $4 billion, with two more payments, one in January and the final one February 17th (the last payment is described as being "contingent on congressional action").

Chrysler's December 29th $4 billion is the only TARP cash the company was scheduled to get.

The government will lend another $1 billion to GM to invest in GMAC.
(Perfectly wonderful GM cars, like this Chevy Cobalt SS, are inexpensive, fun to drive and get great gas mileage. Why the company is planning to replace Cobalt with the Daewoo-engineered Cruze, which is not as good-looking and doesn't even have a solid production date yet in the US, is beyond us).

GMAC now no longer has the exclusive right to provide low-interest loans GM cars and truck buyers, and does not have to finance leases. GMAC loses money on leases because trade-in values are dropping dramatically, especially on large pickups and SUVs.

And new Treasury Department guidelines would let officials provide funds to any company they deem "important to making or financing cars." That means TARP money could go to the Detroit Three's supplier firms, if there's any left to spread around. The steel industry is already asking for their bailout money.

Potential car-buyers, take note: Dealers will often finance used cars, because they make money on interest points they don't get from all-cash deals.
(When all is said and done, Chrysler just isn't making the kind of cars which Americans want to buy. Apart from some EVs trotted-out recently, which are nowhere near production-ready, and the utter failure of their "Hemi hybrid" Aspen and Durango models, this Dodge Challenger musclecar might, sadly, be the last nail in Chrysler's coffin).

All the auto industry support from Washington is coming in the form of loans, not the outright grants enjoyed by the finance businesses; only the automakers had to appear before Congress, provide plans for using the money, and explain how they will pay it back. No such public begging and degradation was demanded from banks or Wall Street's financial institutions. Guess being buddies with Hank Paulson "has its rewards," as the TV ad says.

Some more auto news-y tidbits:

Chrysler has canceled their annual dealer awards ceremony, traditionally held in some exotic location. The Detroit News quoted a Chrysler official saying, "the state of the market and the financial challenges the company faces, it made sense not to hold this year's reward meeting." This year's all-expenses paid trip for dealers and spouses was to be held at the Hilton Los Cabos Beach & Golf Resort in San Jose del Cabo, Mexico. Wonder if that's near any of Chrysler's three factories in Mexico?

GM's Hummer division is ending its sponsorship of the Rod and Chad Hall off-road race team, which brought it numerous victories.

And along with the Hummer brand itself, the Hall team's H1 and H2 SUT race trucks are now up for sale. How much? Maybe they're on Ebay: Check for a "Buy it now!" price.

NASCAR and off-road racer Robby Gordon, who competes in Baja and the Paris-Dakar rally, campaigns a vehicle built to look like a Hummer. He's said his hand-built race truck costs over $1,000,000 (but we've known Robby to exaggerate).
(Top left, Robby Gordon's "$1,000,000 Hummer" race truck, top right, a Hummer entered in one of the recent DARPA government trials to develop fully-autonomous ground vehicles, and, bottom, the Hummer race truck which was driven by Rod Hall and his son, Chad).

Finally, from the "Just what America Needs at this Moment in Time Department" as reported by Automotive News:

"One of the highlights of Ford's display at the 2009 Detroit auto show will be the debut of the 2010 Mustang Shelby GT500, blessed by 86-year-old Shelby himself.
(You're among the first - Introducing the 2010 Mustang Shelby).

The GT500 is equipped with the same powerplant that was fitted into last year's limited-edition GT500KR, a 5.4-liter supercharged V8 cranking out 540-hp at 6,200 rpm and 510 lb-ft of torque at 4,500 rpm. The car has a six-speed manual transmission."

No word yet on price - or mpg numbers.

Join us on Monday for the 2008 car sales (or non-sales) numbers.

Some photos (c) www.SteveParker.com.

Comments

[KillTheMessenger]

"The average vehicle price in 2008 was $27,958. A 3 million unit drop translates into an almost $84 billion loss."

The loss in sales translates into a loss of REVENUE of that order. There is no fundamental law in economics which says that a loss of revenue has to translate into a commensurate loss of income. A business that can control its spending can greatly reduce the risk of actual income loss in case of revenue loss. Sadly, none of our car manufacturers has done a great job about that. In comparison the Japanese car manufacturers seem to have reacted in much more agile ways and they are going to come out of this sales slump with reasonable income losses which they will simply write off over the next years.

'

'

[ImmanuelGoldstein]

All this has a certain entertainment value for me , but it is of course completely irrelevant as a car buyer.
I have never bought a new car and never will. I'm not in the top quintile of income, and if you aren't buying a new car is a pretty hard decision to justify.
The relatively huge sticker price and massive depreciation hit, not to mention the finance charges are completely insupportable. For me , what color the car is, what the sound system is like or whether it'll get me laid is simply off the table. I have one metric. How much of my painfully limited disposable income is going to keep it repaired.
And based on my DIRECT EXPERIENCE even fairly recent American cars simply aren't a patch on the Japanese. in terms of longevity. The American cars may be as good right when they roll off the assembly line and if you flip your car every three years you may not notice that after a certain age they really fall off a cliff in terms of reliability compared with the Japanese models.
Are the new American cars immune to this phenomenon? Call me up in 7 years and I'll let you know.

[Steve Parker - Huffpost Blogger]

Thanks for your comment.
And we agree when it comes your feelings about the Detroit Three.
You've raised some good points, and we're following SEMA's efforts closely and will let you know what happens. These things start, usually, at the state level, and if and when they become state law, then Washington will, at the least, consider making it national.
Japan insists that every car be inspected every year. And you're absolutely right about those inspections; "draconian" is probably a nicer term than it really deserves.
This system (the annual inspection costs somewhere in the neighborhood of $1,500), in a country where a car is not a necessity for most people, "primes the pump" for their most important industry.
On my first trip to Japan (1979), I was amazed at all the bright, shining and perfect cars on the road - everywhere! Then I found out why they are that way...
Many of the cars which owners "turn in" after a failed inspection, either to a used car dealer or broker, wind-up in Southeast Asia.
And Japan's government makes money to pay for all the social services in that country, from mass transit to universal health care.
Dim-witted "clunker laws" which don't take into account the collector and restoration industries, do no one any good. It's kind of a "lose-lose" for all involved.
Steve Parker

[gocougs79]

The Chevy Cobalt is a "Perfectly wonderful GM car"???? I've driven a lot of rental cars, and the small cars by GM and Chrysler are crap compared to the Japanese, Korean, European and even the Ford rentals, especially when they get a few miles on them. I'd rather drive a Corolla with 100,000 miles on it than a brand new Cobalt, and I'm sure I'm not alone.

[letstakeawalk]

I drive alot of rental cars myself, and I know better than to judge a model based on a particular unit that has been used and abused by countless hundreds of different people with differing opinons of how to treat a machine that doesn't belong to them.

The Cobalt isn't stellar, but it did ascend to some remarkable heights. The XFE has better fuel economy (36mpg) than the Civic, Corrolla, or the Focus. The SS has set a record in its performance at the Nurburgring: an 8'22" laptime. That's faster than the Lotus Exige, Audi TTS and S5, the Acura NSX, and a whole slew of other performance cars. Including the Honda Civic Type-R, Volkswagen R32, and Ford Focus ST.

The Cobalt is a moot point now, the Cruze will be here soon enough.

[Steve Parker - Huffpost Blogger]

Thanks for your comment. Thanks also for reminding me about the Cobalt XFE's mileage.
But the bets are off as to when, if ever, the Cruze will be in the US. It's built and is on-sale in South Korea, and the Euro version will be built in St. Petersburg (yeah, that one).
But the US version - slated for building at Lordstown, OH - still doesn't have a start date and certainly no on-sale date at this point.
I'd think more of GM if they'd make a huge deal out of the Cruze rather than trying to convince DC and the country that the Volt is "just around the corner" (a favorite GM PR phrase). Detroit's inferiority complex shows itself in these ways. They never feel that their current products are good enough; they always have to point to the future, and sometimes a very far-off future, at that. Bad for morale, for the corporations and the country.
Steve

[Steve Parker - Huffpost Blogger]

Thanks for the comment!
I take it that you have not driven the Cobalt SS. Drive one and then let us know what you think.
The problem (well, one of the problems) is that in their haste to shove as many trucks down our throats as possible since 1998 or so, the Detroit Three lost sight of a future that Asian and Euro carmakers had been living since Day One, in 1886 when Karl Benz patented his "motorwagen".
High gas prices and narrow, twisty little roads were the reason carmakers outside the US started-out life making small, nimble cars with an emphasis on handling and economy.
The wide-open Interstates of the US lent its miles too big V8 land yachts which could go well in a straight line but when asked to stop or turn, there could be problems.
Chrysler's little Neon had evolved into a small car with lots of power, handling and mpg. And they replaced it with the awful Caliber. Ford is finally (maybe too late) bringing a few of their successful small Euro cars to the US starting in late 2009. And you already know how I feel about the Cobalt (the SS model).
The bottom line? Detroit's mistakes have finally caught up with them, and if they must go bankrupt, let it happen. Personally, with over 30 years invested in this industry, it saddens me, but the situation also validates what I've been writing and talking about for decades.
Steve

[gocougs79]

Steve, I really appreciate that you've responded to all the comments.
I'm sure that the Detroit Three could have built good small cars if they had allocated the necessary resources but as you say they chose to shove as many trucks (and big SUVs) down our throat as possible. They say they were just giving the customers what they want, but they made the customers want what they want in the first place. Having said that, the latest small American cars are as others have said much better than they used to be, but the small Japanese and German cars have gotten even better.
No I haven't driven a Cobalt SS but I'm sure it would be a blast and it's not a bad looking car. To get more people to buy them though, you'd have to know they'll still be a blast to drive at 100,000 miles and have a few years of life left.
Cheers, Geoff

[RuthlessDictator]

I haven't been in a new Cobalt, but a good friend of mine owns a '04 Cavalier, which seems to be pretty nice and well built. Much better than his horrible '90 Cavalier (and my '89 Chevy Beretta),

That horrible '90 Cavalier was much better than his total POS '79 Chevy Citation!

[letstakeawalk]

Regarding your comment about the upcoming Cuze replacing the Cobalt, I'd like to point out that while the Cobalt is indeed a fine little car, it suffers from the same perception problems as much of Chevy's line. The Cobalt's basic look strongly echoes the Cavalier upon which it is largely based, and I cannot possibly attempt to defend the ancient Cavalier.

The Chevy Cruze is a "global" car, being built and sold in a greater variety of markets than either the Cobalt or Cavalier. The Cruze platform will have variants including small MPVs. Improvements for the Cruze include new direct-injection gasoline engines that should achieve 45mpg vs. the Cobalt's 37mpg. New electrical systems and lighter-weight construction will also lessen the Cruze's impact on the environment relative to the Cobalt.

http://consumerguideauto.howstuffworks.com/2011-chevrolet-cruze.htm

http://www.autoblog.com/2008/08/21/gm-releases-official-pics-of-2011-chevy-cruze/

[Steve Parker - Huffpost Blogger]

Thanks for the comment.
I don't agree about Cobalt being perceived as another Cavalier - because many of the buyers it's aimed at weren't even born yet when the Cavalier was on-sale. I think, unfortunately, that GM did its best to sell the Cobalt, and the results are, well, the results. Dealerships still need to have people walk into the showroom excited about a car, but when most people under 40 say they won't consider an American car, that's a huge handicap. And ... who can blame them?
GM might as well keep making and try to sell as many Cobalts as they can. The Cruze is not going to be a "division-saver" (and talk about styling - gimme a Cobalt before a Cruze!) and, as of now, GM has made no commitment about when the car will start production and be available.
And I'm not apologizing for GM (or Ford or Chrysler) as you'll know if you have the time to peruse some of our other posts.
Detroit's getting what they deserve, but it's also alright sometimes to talk about the cars they make which we like, rather than (easily) condemn them all.
Steve

[ferrarimanf355]

Um, the GT500 isn't a volume seller. Sheesh, the enviro-fascists need to get a grip and stop trying to kill the fun...

[Steve Parker - Huffpost Blogger]

We have no problem with with small run cars like the Shelby (or Ferrari or ZR1 or Challenger Hemi, etc), but: Is that what Detroit really needs to be promoting now?
The big problem are all the V8s and big V6s in SUVs and pickups ... about 3 million sold every year ...
To me, a car like this Shelby is just one more thing Congress can throw in Detroit's face, and America will probably agree.
In the 1960s, Detroit was forced to not only cancel "high-performance" in their advertising, but also to end factory support of racing. So they picked a few dealerships to run their racing equipment businesses (like Don Yenko Chevrolet and Royal Pontiac).
Things eventually cooled-down (and how) but this is a similar time in the nation's and the industry's history.
SEMA is now heavily lobbying every state and DC to try and control the spate of coming "clunker laws" which would effectively kill the restoration and collecting hobbies.
Sometimes, "laying low" is a good idea.
Steve

[RuthlessDictator]

Hi, Steve,

I don't remember the year (maybe sometime in the '90s) but I do recall the Fed. Govt. wanting to scrap all pre-'80 automobiles and didn't make any concessions for antique and classic cars. Thankfully this harebrained idea was killed off before it was even considered.

As much as I despise the Big Three right now (by that I mean the corporate culture, not the workers or the products), I do enjoy seeing the properly restored and well cared for classic American car (hot rods, too!). The "clunker laws" will do nothing for the environment and will just hurt poor people who may need help nursing an old car along or assistance with buying a newer car.

Japan already has a very draconian clunker law where you can't even drive a car with rust or a dent on the body. This basically forces the Japanese to buy a new car every two years or so.