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U.S. Auto Sales Continue Downward Slide

Auto sales in the U.S. continued on their downhill roll as most manufacturers reported high, double-digit sales decreases. Industry analysts see the trend in this key bellwether economic sector as further evidence of a deepening recession.

How things shook out in April: The auto industry in general suffered a 34.4% decline for a total of a seasonally adjusted 9.32 million units. According to Autodata, this approaches low levels not seen in 30 years. General Motors (GM) reported a 34% drop in sales (year over year), while Chrysler posted a 48% drop in sales. On the plus side, GM said it somehow managed to increase market share during the period (see related story), while Chrysler, which announced a “surgical bankruptcy" last week, said it plans to emerge from Chapter 11 by the summer.

Overseas manufacturers and transplants were not immune. Toyota's sales fell by 42%, with revenues at its luxury division, Lexus, off by 39%. Meanwhile, Nissan was down 38%, and Honda's sales were off by 25%.

The dramatic falloff in automotive sales reflects the predicaments faced by dealerships—which can't keep up with operating costs amidst bloated inventories—and consumers who, for the most part, are having difficulty arranging financing. Indeed, banks and lending institutions continue to tighten their belts. Auto and mortgage lender GMAC LLC losses grew by 15%, reflecting an increase in soured loans as the economy weakens. The net loss increased to $675 million from $589 million a year earlier, as the Detroit-based company set aside 78% more for loan losses than a year earlier.

In December, GMAC became a bank holding company and received a $6 billion government bailout. As part of a debt restructuring that month, GM and private equity firm Cerberus Capital Management, which held the majority stake in Chrysler, were forced to reduce their respective 49% and 51% stakes in GMAC. Profit from auto finance fell 13% to $225 million. Industry watchers say the company may face increasing pressure as its former parent GM veers toward bankruptcy, following rival Chrysler. GMAC is the main provider of financing to buyers of GM vehicles. Last week, GMAC agreed to provide financing for Chrysler customers and dealers after that automaker filed for bankruptcy protection. Cerberus led a buyout of Chrysler in 2007.

Source: Reuters, The Daily News
 

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