U.S. auto sales in February slid to the lowest rate since December 1981, and it’s not only domestic manufacturers who are struggling. Dow Jones reports that Toyota’s monthly sales in the U.S. dropped 40% year-on-year to 109,583 vehicles, Honda’s slid 38% to 71,575 units and Nissan’s fell 37% to 54,249 cars and trucks.
This week, Japan’s biggest carmaker, Toyota, sought loans from the Japanese government as the global economic downturn continues to hurt demand for new automobiles worldwide. While the numbers have not been publicly announced, Kyodo News and NHK TV reported that Toyota asked for 200 billion yen ($2 billion). Honda announced yesterday that it too is seeking government loans. Bloomberg notes that Mazda may soon follow suit and is exploring new sources of capital.
The Japanese Finance Ministry said Tuesday it will provide an additional $5 billion from its foreign reserves this month to make sure there is ample cash available for needy businesses. Japan appears to view the problem differently than in the U.S. where automakers were treated with scorn in appearances before Congress late last year.
As Wall Street Journal reporters John Stoll and Takashi Nakamichi wrote yesterday, “the auto industry crisis that started in Detroit is rapidly expanding into a global problem, pressuring governments around the world to join the U.S. in providing aid to struggling auto makers.” The economic crisis is not limited to one industry or one nation. If international units of significant auto manufacturers fail, their larger companies may not be able to succeed.
The U.S. has already provided bridge loans and other financial help to GM and Chrysler and is considering additional financial help to the industry at large. Automakers have also received financial support from Canada, France, Spain, Germany, Britain and Sweden. It should now be clear that there is an unprecedented collapse of demand across the globe. Until the global economy turns around, new car sales are not likely to improve. Few, if any, automakers are able to withstand the significant effect on their balance sheets.