The automotive sector, always a cyclical industry, is experiencing an almost unheard of sales drop from 16.2 million units in 2007 to an ‘09 level of 10.5 million units sold in the U.S., according to one manufacturer’s projections, a 35% decline.
As Kevin Krolicki of Reuters reported this week:
“U.S. auto sales for January are expected to drop to a 27-year low, extending a 15-month downturn and adding weight to the view that the hard-hit sector will remain a drag on the economy in the current quarter.”
During the Congressional deliberations on the efforts to provide bridge loans to the domestic three, some skeptics spoke disparagingly of the domestic manufacturers’ failure to offer vehicles Americans want to buy. If current sales numbers are any indication, no manufacturer is producing such vehicles. In December, Toyota’s sales were down 37%, Honda suffered a 34.7% decline, and Hyundai saw a 48% fall off. Two of the three domestics actually fared better; GM down 31% and Ford 32%.
The automotive decline was prompted first by the gas price rise and housing slump and then exacerbated by the financial meltdown and the drying up of credit markets in the last quarter of ’08. Since January, 2008, 3.6 million jobs have disappeared, about two million in the last four months of the year. The unemployment rate is above 7%. GDP fell at an annual rate of 3.8% in the fourth quarter, the largest decline since 1982, with negative growth anticipated through the first half of ’09. Personal income in ’08 has declined by $20.7 billion.
The big question for automotive sales is how quickly a new stimulus package that the Obama administration is pushing — combined with last year’s stimulus package — might provide a boost to the nation’s struggling economy.
As the stimulus debate continues in the Senate this week, the auto industry along with the U.S. will continue to wait and see. Given these statistics and the latest automotive sales figures, the passing of a stimulus plan seems to be essential. What do you think?