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U.S. Automotive Sales Continue Slump in January

Automotive sales in the U.S. continued their downward spiral as several major manufacturers reported high double-digit declines.

Automotive sales in the U.S. declined by double digits in January, with Chrysler, General Motors, Ford Motor Company, and Toyota taking the biggest hits. The automakers’ sales fell by 55%, 49%, 40%, and 32%, respectively. The losses are not just relegated to the aforementioned suppliers. Volkswagen said its sales declined 11.6%, while Honda’s sales dipped 28%. Even Mercedes reported a decline of more than 35%. Industry analysts cite the usual suspects: slower dealer traffic combined with stiff resistance among banks and financial institutions to provide auto loans for only those with near-perfect credit ratings.

The dramatic falloff in sales extends beyond softness in consumer consumption. Fleet sales—bulk deliveries to car-rental companies and other businesses—are also faltering, particularly for suppliers such as GM and Ford. According to officials at Ford, the company sold 2,000 vehicles to fleet operators, down more than 80% from 14,000 in January 2008. GM said its fleet sales fell 80%.

The steady downturn in the automotive manufacturer market is clearly impacting suppliers and OEMs. Industry analysts say auto parts suppliers are currently in discussions with the Treasury Department about ways to address their financial troubles. Although no formal request for financial help has been made, and no dollar amount has been requested, some manufacturers are making moves to shore up their supplier partnerships. GM, for instance, is reportedly in talks to reacquire parts of Delphi, the auto parts supplier it spun off a decade ago that is now in bankruptcy. Under the terms of the proposal, GM would take back several Delphi plants that produce parts only for GM. The two companies had previously worked out an agreement under which GM would essentially subsidize those operations, giving Delphi cash as it worked its way through bankruptcy.

The move would not be unprecedented. In 2005 Ford struck a similar deal with Visteon, the auto parts supplier it spun off around the same time that GM split off Delphi. During that time, Ford bought back several parts facilities from Visteon.

Source: New York Times, Wall Street Journal
 

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