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Flint: Sales Below 16 Million?


Want a prediction of auto sales for the remainder of this year? Fasten your seatbelts. It's going to be a bumpy ride.

The automobile business doesn't stand in isolation from the remainder of the economy. Right now there's trouble in the economy so where does that leave the auto business? Estimates for the year's sales already have been lowered, but the industry estimates still seem strong considering what's going on.

 

I think people are afraid. Maybe it's unreasonable fear, but it's there on the front page every day. Fearful people aren't as likely to buy cars in record numbers.

The stock market is chaotic, up 1000 and down 1000 points in recent weeks.

The housing market is slumping. Sales are falling. Foreclosures are climbing and likely to climb even higher when interest rates go up on those adjustable mortgages.

Hedge funds go bump in the night and credit is suddenly gone. Interest rates are up if you can get a loan. Even Cerberus had trouble borrowing the money to buy Chrysler.

And, of course, the price of oil remains around $70 a barrel as speculators and oil companies, with convenient refinery shutdowns, keep the price up. This leaves well owners from Texas to Teheran happy but the rest of us paying $3 a gallon. No downturn in sight now, either.

What about cars?

So what does that mean for the auto market? It's not good. In June the industry was down 45,000 sales from the year before. But the Detroit Three — we can't say Big Three anymore with Ford likely to end up in fourth place in sales for the year — were hit much harder, down 211,000 units from the year before. In July the industry was down 184,000 car and truck sales and the Detroit Three took 148,000 of these. So there's a downturn and Detroit is being cut up worse than the foreigners.

What we don't know is how long the falling sales will continue or how steep the decline will be. If August and September are like July, that is very bad news indeed. But it's really impossible to guess.

The market may turn around. The Dow Jones average may climb to 15,000, the Federal Reserve might lower interest rates, and all those folks losing homes might be able to refinance at five percent.

I don't think so but I don't know.

Last year sales were 16,560,000 car and trucks. We're 311,000 sales behind last year after seven months, so if sales for the remainder of the year matched last year the total would be something like 16,250,000.

Let's look at some past years:

2006   16,560,000 vehicles sold
2005   16,997,000
2004   16,913,000
2003   16,676,000
2002   16,848,000
2001   17,177,000
2000   17,402.000
1999   16,958,000
1998   15,996,000
1997   15,161,000
1996   15,139,000

So if sales matched the year ago for the remainder of this year, this still would be the lowest sales year since 1998, but still above 16 million.

 All these worries

Frankly, it's easy to see sales dipping below 16 million this year. I don't want to sound like a pessimist, but I would expect that sales would drop under the 16 million mark if GM and Ford stick to their efforts to hold down rebates and givebacks. They should stick to this program, but it is going to be tough the way sales are falling. And whatever the final number, the bulk of the losses this year will fall on the Detroit Three.

Is there any good news?

General Motors might — might is the key world here — be leveling off at 23.5 percent of the market. That's no sure thing, but there are a few signs of leveling off. Where Ford ends up is anyone's guess. Ford's seven-month market share was 16.4 percent but July was down to 14.8 percent.

It's a good negotiating stance for the companies, with the bottom still failing out because it might temper the United Auto Workers resistance to givebacks.

And it's good to see Chrysler as an American company again, although there's no sign yet that this means improved decision-making.

 

Car sales don't have to be down just because I think they will be. Predictors of downturns have been wrong again and again since 1999, and can be again. This is one where I'd rather be wrong.

Related Articles

 

Ford: “Time Is Not Our Friend” by Joseph Szczesny (7/1/2007)
The ‘08s are arriving, but the clock is ticking.

 

Flint: Sell Jaguar? No, Not Now! by Jerry Flint (6/16/2007)
“Once more unto the breach dear friends, once more.”

 

 

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