Carmakers, new and used car dealers and the rest of us, the all-important cogs in the machine, the car-buyers, are all having a tough time. When it comes to America's consumers, though, there seems little, if anything, in the way of relief from Washington.
We've been posting almost daily about how this economic crisis, which is slamming homeowners and almost anyone and any business needing credit, is taking a toll in another even more insidious way - that of people missing their car and truck payments.
Home mortgages and foreclosures make headlines; someone who has missed a car payment or two isn't a "hot" enough story for the evening newscast. "No visuals!" a TV producer will say. Nobody puts a sign saying "We Repo'd Here!" at the end of a driveway when some poor person loses their car or truck, which is often their only source of transportation for work, school, doctor visits, shopping, etc.
Automotive retailing accounts for 20 percent of all retail sales nationwide - 20 percent of all retail sales in this country - and they've already dropped precipitously. Auto sales were down 26.6 percent in September compared to a year before. There were 965,160 vehicles sold in September in the US, and the last time fewer than one million cars and trucks were sold in a single month was February, 1993.
Markets as diverse as Great Britain, Germany, Vietnam, India, South Korea and Italy all suffered dramatic car sales losses that month, as did China. In Japan, September sales dropped to their lowest levels in 34 years.
And while October isn't even half over, it's almost a sure bet that these kinds of serious losses will continue and creep into even more countries.
The number of people late on their monthly car and truck payments is also huge, represented by nearly $25 billion worth of consumer auto loans that are delinquent, a new study reports, according to industry journal Automotive News.
In the second quarter of 2008, Experian Automotive says, 2.48 percent of all auto loans were 30 days past due, compared with 2.28 percent in the year-ago quarter. Auto loans that were 60 days past due in the second quarter rose to 0.75 percent from 0.67 percent in the second quarter of 2007, Experian says.
Don't let those seemingly-small numbers throw you; they add up to $25 billion in missed or late payments.
The machinery for the Detroit bailout was in a bill passed last December; the $25 billion amount of the bailout has now been worked-out and approved by lawmakers. GM, Ford and Chrysler should start seeing about $7 billion of the total this week.
Chrysler is an especially interesting case. They're an independent, privately-held company with no stockholders, and their stock is no longer traded on any of the world's exchanges. It occurs to us, and maybe you, too - Should Chrysler even be eligible for a bailout using taxpayer's money? Sure, plenty of companies benefiting from the big bailout are privately-held, too. Think of all those investment house, bank and brokerage firm executives who are whooping it up this week thanks to our money.
But if Chrysler were to go out of business, it wouldn't mean the end of the world, wouldn't mean the destruction of some sort of iconic corporation whose loss would irreparably harm the nation. These were among the reasons put in front of us when the public was clamoring (and still is, rightfully) for government to justify the $700 billion bailout.
It's still not entirely clear whether some newly-formed government entity will be able to buy bundled car loans and leases and hold them until the market considers them viable and profitable again, as is happening with home mortgages.
The news is not any better for the nation's new car dealerships.
Annette Sykora, chairperson of the National Automobile Dealers Association (NADA), is quoted in the Detroit News as predicting the possibility of up to 700 new car dealers closing-up shop by the end of the year.
"Credit is the lifeblood of this industry," she said at an Automotive Press Association luncheon at the Detroit Athletic Club. "We now need government to implement the recovery plan as quickly as possible."
Sykora also said that the number of dealers forced out of business because consumers have stopped shopping for cars and trucks, or shifted from big vehicles to smaller cars, could increase if the $700 billion bailout plan that was passed and signed by President Bush last week is not implemented soon.
There are currently 21,534 new car dealerships in the US according to industry journal Automotive News, a drop of 227 from the year before.
Last week, in researching a story for the Santa Monica Daily Press, I spoke with the sales manager for a medium-sized Toyota dealership in that lovely California coastal city. He told me that the dealership has just over 100 employees, many of them from the local area who have worked there for 20 years or more.
If 700 dealerships were to close their doors, using the information the Toyota sales manager gave me, we can safely say that as many as 70,000 men and women, many of them highly-skilled, whether it be in the sales office or in the "back," where the parts and service operations are located, could lose their jobs between now and the end of this year.
From the kid who loves cars and shows-up every day, before school, to wash and keep the cars "on the line" clean and shining, and who wants to work in a dealership full-time someday, to the technicians who are as talented with computers as they are with wrenches to the sales office and everyone else involved in keeping a dealership open, no worker in America deserves to lose their job like that.
And very often, the sales staffs at dealerships work on commission only, and if they are salaried, it is at some ridiculously low rate to keep the state investigators away. Finding a dealership which offers sales staff and other key employees 401K plans and health insurance is rare indeed, much too rare for the 21st century.
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The ONLY American car company? How do you come up with that?
Here's how to determine where a carmaker's home market is: Where their profits wind up. I know that Toyota (and BMW, Honda, Mercedes and a bunch more) spend a load of money in the US and a lot of the money they make here goes right back into their American facilities and their American employees.
But ultimately, whatever is left over goes to Tokyo (well, actually, to Toyota City, which is near Nagoya - Toyota is that rare Japanese company not headquartered in Tokyo).
Thanks again.
Steve
Most all of the sales employees at most dealerships work on commission only. The dealer might pay them a daily stipend so they're at least working for minimum wage, but the vast majority of their money comes from their own sales.
Many dealers, too many, offer NO benefits to their sales staffs. Nada. Zip. Zero. From vacation days to sick days to not even a wardrobe or dry-cleaning allowance. Food on-the-job? Buy your own.
Some of this may soon change (especially when it comes to health insurance), but the dealers will tell you they are giving these salespeople the opportunity to make a lot of money (which is true) but in return for that, they also think it's okay to not offer them any benefits whatsoever. Most salespeople are signed as "independent contractors," too, so these men and women also must take care of their own taxes.
Like I said, I see it from both sets of eyes. Car-buyers are completely "out-gunned" when they walk into a dealership. Maybe I can do some posts on "how to buy a new or used car" to help visitors to this blog. What do you think?
Steve Parker
Credit could be immediately restored if the .7 trillion were used to create 20 new banks.
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The stock in the new banks would be sold to the public once the crisis is over.
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Banks can be easily replaced. They are not like car manufacturers.
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If the existing banks cannot do the job, get new banks.
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I am seriously hoping that either GM or F can go bankrupt. it would be very good for the rest of the industry.
auto industry has TOO MUCH CAPACITY !! Overcapacity = no profits !!
In Europe mass transit makes that unnecessary and they are better for it.
If we had a decent mass transit system there would be no more car payments, insurence payments, repair costs and gasoline to suck the money out of the economy.
The private automobile is coming to the end of its history.
And none too soon for me.
The dinosaur powers that be weren't prepared for all of us to shift our demand all at once to something more practical. Capitalism sucks when you're caught off-guard. ;-)
Los Angeles had one of the world's greatest mass transit systems prior to and after WWII, called the Red Car Line. It was built by Huntington Hartford, and one could ride all day for a few cents, from Pasadena to the beach, from Orange County along the beautiful Pacific coast to Long Beach, the San Fernando Valley from end to end, from the gorgeous orange and lemon groves of the Inland Empire to anywhere in Los Angeles proper.
After the war, car sales went nuts. There was HUGE pent-up demand. All the carmakers stopped making private vehicles when it started (except some Cadillacs and Buicks for generals and the like; Cadillac actually built tanks). And boy, were there some sweetheart deals for the carmakers to "thank them" for their cooperation during the war. More in another post.
But city planners were concerned about all these cars being sold, many more than ever before.
Leaders from GM, Firestone and Standard Oil visited Los Angeles and talked politicians into trashing the Red Car Lines and investing in the new, large and gleaming busses which would help traffic, make roads safer and so on and so on.
Whatever they might have thought, they were convinced to trash the system. Parts of it ran until the early 1960s.
Thanks again for your comment.
Steve Parker
I have no problem with seeing the American auto nation go right down the drain. How would it hurt me if Japan and Korea sold all the new cars in America?
Steve Parker