Credit Crisis Plunges September Auto Sales to Uncharted Depths

Credit Crisis Plunges September Auto Sales to Uncharted Depths

By Dale Buss and Michelle Krebs

Wheezing U.S. auto sales in September fell by 26 percent, coming in below one million units for the first time for any month in more than 15 years and prompting epochal comparisons to the dismal fall of 2001, when American consumers were frozen by the shock of the 9/11 terrorist attacks.

Overall sales for the month were only about 965,671 vehicles, compared with some 1.3 million vehicles sold in September 2007. In September, the seasonally adjusted selling rate -- the industry's most important interpreter of the sales picture -- fell to an abysmal 12.8 million units compared with a rate of 16.5 million last year.

"We could see close to a 20 percent decline year-over-year until the end of the year," said Jesse Toprak, executive director of industry analysis for Edmunds.com. "If that happens, auto sales could fall to near 14 million units for the year -- quite a difference from more than 16 million last year."

Shock Treatment

The problem in September was as simple and overwhelming as it was profound: Too many potential customers sat home, especially late in the month -- transfixed by news coverage of the spectacular cratering of the credit and stock markets and anxious for resolution of the national financial crisis through a bill that was to passed by the U.S. Senate on Wednesday evening.

And many others who may have been motivated to purchase a vehicle where frozen out by the evaporation of personal credit stemming from the same crisis. Customer traffic in many dealerships almost completely dried up in late September, according to some reports.

Comparisons to the period almost exactly seven years ago seemed natural. In fact, now could be worse. "The situation of the U.S. economy is a little more testy and quite a bit more problematic than it was in the fall of 2001" after 9/11, said George Pipas, Ford's director of U.S. sales analysis.

Mike DiGiovanni, General Motors' executive director of global market analysis, said that the auto market has "reached a point now where it's not just the physical realities of credit tightening but it's psychological, in the consumers' mind and in businesses' mind."

Source: Edmunds.com

Beyond Fuel Prices

The desiccation of the auto market in September stemmed from a dynamic that has proven even more powerful than the huge second-quarter leap in gasoline prices.

Last spring and early summer, gas prices spurting past $4 a gallon greatly undercut overall sales and prompted the buyers who remained to flock to more fuel-efficient vehicles. Dependent on sales of large SUVs and pickup trucks, the Big Three domestic makers suffered far more from that blow than did most Japanese and German companies.

But last month's sales disaster was indiscriminate: It affected luxury and economy models, big and small, fuel sippers and gas guzzlers, foreign-made and domestic. The U.S. Big Three and Toyota suffered mightily as they have for months, but in September even Honda - whose fuel-efficient fleet had helped it largely achieve positive sales comparisons this year - saw its sales decline by 20 percent.

"This is the toughest economy we've seen in a long time," said Mark Barnes, chief operating officer of Volkswagen of America, whose small, fuel-efficient lineup had managed to keep the company's performance near flat this year in the U.S. market until September sales declined by 9 percent.

Only GM, among the Big Six automakers, professed to be at all heartened by its September results. Its 12-percent sales decline was least of that group. In fact, GM's stronger showing combined with the dismal performance across the board of the others helped Detroit automakers boost combined market share above the 50 percent mark -- 52.9 percent, to be precise.

Uncharted Territory

Edmunds' Toprak foresaw even more bloodletting by the industry. "We could start to see more production cuts during the fourth quarter if we continue to see these types of numbers from automakers," he said.

Ford's Pipas declined to address questions about Ford's production plans for the rest of the year, while noting that the company already had cut its output schedule significantly.

"The market is artificially inflated, as there is demand for new vehicles," Toprak said, "but until we see consumer confidence rise ... sales will continue to be weak."

Even worse, auto company executives themselves no longer foresee a bottom to the market. As recently as a month ago, some were willing to forecast that U.S. auto sales had bottomed out and at least wouldn't contract further in the months ahead. But with the problems on Wall Street revealing one weakness after another in the U.S. financial and regulatory system, and taking a greater toll on the general economy, automakers Wednesday were decidedly glummer.

"In some ways you just have to tough this out," Pipas said. "It's very hard to make a market." He concluded: "Fundamentally, you're going to have to see the housing market improve before we see any kind of sustainable increase" in auto sales.

The Question of Incentives

Pipas underscored his perspective by alleging that, in a market whose heartbeat is so weak at the moment, throwing big incentives in front of consumers won't make a long-term difference. "Sales generated today totally by merchandising," he said, "will probably be paid back [in lower sales] in the months to come." Presumably, he was referring to major incentive programs that GM and Chrysler had in place in September.

But GM's Mark LaNeve, vice president of North American sales, credited the company's Employee Discounts for Everyone program - which expired Tuesday - with helping GM and its dealers reap their highest market share for any month in more than three years: 29 percent. And the company this week announced a new incentive program that began Wednesday, offering zero-percent financing on many models.

"There's no reason to think that we can't continue to perform or will have huge payback," LaNeve said. "We continue to think payback will come out of the other guys."

General Motors: Best Market Share in Three-Plus Years

GM sold more than 284,000 vehicles in September compared with nearly 338,000 in September 2007.

Yet, amid the gloom of the industry's overall performance in September, and against the backdrop of continuing economic degradation, GM executives had some things to tout. Their new market-share zenith was one of them.

They also declared their Employee Discounts for Everyone incentive program a success because it helped GM gain market share but not at great cost to the company. On average, GM's per-vehicle incentive spending in September was only about $100 more than in August, which in turn was about flat with July.

"Our strong share performance of the last two months wasn't driven by incentive escalation," LaNeve said.

GM also is benefiting from a slight reversion of the industry's sales mix back toward SUVs and pick-up trucks. As gasoline prices have slid closer to the $3.50-a-gallon mark since mid-July - instead of shooting further upward as many had prognosticated - more consumers are drifting back into GM's wheelhouse.

"We have seen a seven-[percentage]-point shift over the last four months from cars back to trucks [and SUVs]," said DiGiovanni, unwinding a bit the seismic segment shift toward fuel economy that the industry witnessed in the second quarter. "We really feel our portfolio is maybe the best-balanced in the business, to take advantage of whichever way the market goes."

The Good

Start with the fact that GM's relative market performance was better than any of its major rivals for September.

Specifically GM noticed a continued surge in sales for the new Chevrolet Malibu that it introduced about a year ago. Sales rose 68 percent in September compared with a year earlier and are up nearly 37 percent for the year-to-date.

Even the Chevrolet Impala, an old design, saw a sales uptick of 17 percent in September although it's down 16 percent so far this year.

Some of GM's other newest vehicles performed well, including Pontiac Vibe, a small crossover (September sales up 91 percent) and its crossovers including the Buick Enclave and GMC Acadia.

The Bad

Hummer has become a painful afterthought for GM. The brand is still on the auction block, but September's 50-percent sales drop for Hummer certainly didn't help its value.

One of GM's biggest dealership groups, Bill Heard Enterprises, filed for bankruptcy-court protection in late September. But LaNeve maintained that, overall, it wouldn't hurt the company because Heard's outlets represented only about 1 percent of GM's retail sales and controlled only about a half-percent of its inventory.

Ford: Lowest Volume in at Least Six Years

Ford's September sales totaled fewer than 117,000 units, down nearly 34 percent from more than 176,000 units a year earlier.  

"Consumers and businesses are in a very fragile place," said Jim Farley, Ford group vice president of marketing and communications. "An already weak economy compounded by very tight credit conditions has created an atmosphere of caution."

Particularly, it appeared, when it came to buying Ford vehicles. Pipas noted that Ford joined Honda, Toyota and Nissan in reducing its incentive spending during September, while GM and Chrysler hiked theirs.

So Ford's retail sales fell 35 percent in September compared with a year ago, while fleet sales declined 29 percent. Pipas said there was little any automaker could do to generate sales - with or without incentives - as September drew to a close.

"It was tantamount to a natural disaster in the kind of showroom traffic we had," he said, "or like immediately following the 9/11 situation."

So Ford executives chose to focus on what they called enthusiastic reception for some of   their newest vehicles. That includes the Flex, the boxy, quirky-looking crossover whose marketing launch was in September. Farley said that "conquest" rates for Flex purchases - meaning that consumers were moving over from some other company's products - were higher than for any Ford product except the Escape Hybrid.

The Good

Ford's bread and butter has become its Focus subcompacts, to which consumers have been flocking because of its fuel efficiency and because of the availability of nifty innovations such as the Sync passenger-electronics system. 

Farley said that reception also has been good for the new Lincoln MKS sedan. It ranked third in the mid-size luxury-car segment behind only the BMW 5-Series and Mercedes-Benz E-Class, Ford said. 

The Bad

Ford's volume was the lowest that Edmunds.com has on record for a month going back to January 2002, and so was volume of three of its four brands (with the exception of Lincoln)

F-Series truck sales plunged 42 percent in September compared with a year earlier. But, of course, Ford is preparing to introduce a new F-Series in November. Farley said that the new trucks already are moving into dealer inventories and that the rollout is ahead of schedule.

Chrysler: No Place to Go But Up?

Steve Landry, Chrysler's executive vice president of sales, called September "another gray-hair month with the automaker's sales staying above the 100,000 mark but barely. Chrysler sold 107,349 vehicles, a 33-percent decrease on an unadjusted basis from a year ago.

Landry said Chrysler has laid out an "aggressive" incentive and marketing plan focused on cash rebates and discounted financing that will run throughout the rest of the year.
"We've crafted a strong program," he said in a conference call with the media Wednesday. "We're not staying flat footed - and we'll get very aggressive in fourth quarter. We're looking for positive sales in those months."

Not that Chrysler hasn't already been aggressive with incentives. After quitting leasing on Aug. 1, Chrysler's incentives have soared to record levels.

The Good

While Landry saw positive news in the sell-down of 2008 Dodge Rams as well as sales of minivans and Dodge Journey, there was not much other good news.

Indeed, minivans were the bright spot. Both the Chrysler Town & Country and the Dodge Grand Caravan saw a sales increase of 6 percent each in September. Still, for the year, Town & Country sales are down 4 percent; Grand Caravan sales are off 22 percent.

Viper posted a sales increase. Perhaps buyers fear they won't be able to get one since Chrysler is exploring the possibility of selling the franchise.

The Bad

Chrysler sales in total were down 33 percent on an adjusted basis and are down 25 percent for the calendar year to date.

Within those totals, Chrysler brand sales were off 40 percent in September and 33 percent for the year; Jeep sales were down 43 percent in September and 26 percent for the year, and Dodge sales declined 25 percent in September and 21 percent for the year.

Toyota: Worst Month Ever for Tundra
 
Toyota reported September sales of 144,000 vehicles, a decline of nearly 30 percent, deepening the company's individual poor performance in the 2008 market. September marked Toyota's steepest sales decline since the 1980s.
 
The company's poor results were almost equally reflected in its two biggest divisions. Toyota brand sales declined nearly 29 percent from last September, while Lexus sales declined by more than 33 percent.
 
The Good
 
Sales of Toyota's Yaris subcompact were up 29 percent for the year-to-date through September. But, perhaps reflecting a bit of cessation in consumers' overwhelming concerns about fuel economy, in September, Yaris sales were flat.
 
Echoing signs of life elsewhere in the minivan market, Sienna sales increased 2 percent in September, though they were down about 10 percent for the year so far.
 
Some of Toyota's large SUVs - including Toyota Sequoia and Toyota Land Cruiser, and the Lexus LX - continued to sell relatively well, though in overall limited volumes.
 
The Bad
 
Toyota's staple small cars, Camry and Corolla, each experienced a sales decline of 24 percent to 25 percent in September, and each is off by low-single-digit percentages for the year to date.
 
Like its rivals offered by the Big Three, the Toyota Tundra pickup truck - though a product new to the U.S. market just last year - is selling very poorly. September sales were off 59 percent from a year ago, marking the vehicle's worst monthly sales performance since its introduction month of January 2007.

Nissan: Incentives Quit Working

Nissan has marveled the industry by being the only one of the Big 6 automakers to post sales increases and record high market share, but it did so with hefty incentive spending, according to Edmunds.com's analysis. 

Nissan's incentives, like the incentives of other automakers, seem to be doing little good. In September, Nissan North America sold 59,565 Nissan and Infiniti vehicles, a 36.8-percent decrease from the 94,269 sold a year ago, on an unadjusted basis. Nissan Division sales declined 38.4 percent; Infiniti sales fell by 24.1 percent.

The Good

Every vehicle in Nissan's portfolio posted a decline compared with last September, except for the Rogue. However, the increase is an artificial spike as the Rogue was just introduced in September a year ago.

Despite a disastrous month, some vehicles managed to continue to have higher sales for the year to date. They included the Nissan Versa, Sentra and Altima -- which have been leading their segments in incentives -- and the Infiniti G coupe.

The Bad

Nissan North America's sales 36.8-percent decline in September pushed calendar year-to date sales 3.4 percent lower. Worse, sales were off a whopping 45 percent from a great August performance.

Nissan division's sales plummeted 38.4 percent in September to their lowest level since February 2003. Sales were down 3.3 percent for the year to date.

The cornerstone of Nissan's sales, the Altima, saw sales nosedive 42.4 percent in September to their lowest level since April 2007.

Infiniti took less of a hit than the Nissan division, but sales were still down 24.1 percent in September and are off 4.1 percent for the year. And even sales of the venerable G were down double digits.

Honda: No More Immunity

Honda, which had bucked the industry's downward sales trend for much of the year, joined the rest of the ranks by reporting a 20.9-percent decline in September sales, adjusted to a daily-sales rate. American Honda sold 96,626 Honda and Acura vehicles in September.

"This September was an incredibly volatile month for Wall Street," Dick Colliver, executive vice president of sales for American Honda, said in the company's statement. "Obviously, no one is immune to market shifts as dramatic as we have been seeing."

Honda Division sold 86,629 vehicles, a decline of 20 percent from a year ago. Honda car sales decreased by 18.5 percent to 50,611 vehicles. Honda truck sales decreased 22 percent to 36,018 vehicles. The Acura Division sold 9,997 vehicles, a decrease of 27.5 percent.

The Good

The Fit achieved a September record of 6,515, up 48.7 percent in its first full month available as a completely redesigned 2009 model. That pushes Fit sales 54.2 percent higher for the year.

Civic Hybrid sales were up a tad - 0.6 percent in September and are15.8-percent higher for the year.

The Bad

With sales down 20 percent in September and 1.1 percent for the year, September 2008 marked the worst month for American Honda since January.

The traditional steady performers - Civic and Accord - saw sales declines in September. And the new Pilot didn't help. With sales down 12.6 percent in September, the redesigned Pilot clearly has not caught on yet.

The Honda division was down 20 percent, though it remains up 0.8 percent for the year so far.

Acura, Honda's trouble spot all year, suffered a 27.5 percent sales decline in September, putting it 15.3 percent lower for the year. All Acura models experienced double-digit drops. The RDX and RL posted sales of under 1,000 units each.

Mazda: Mazda6 Gears Up, Once-Hot Mazda3 Chills

Mazda North American Operations sold 16,169 vehicles in September, down 35.6 percent compared with last September.

The completely new 2009 Mazda6 just began showing up in dealerships in September, backed by a heavy national ad campaign. Mazda claims the sedan is off to a great start and exceeded the automakers sales objectives for the car. Mazda sold 3,694 Mazda6 models, down 3.9 percent from a year ago.

Mazda5 sales were up 26.8 percent from a year ago to more than 1,000 units in the month.

However, the once-hot Mazda3 has cooled sharply, with sales down 43.3 percent for the month. And every other model in Mazda's line saw decreases of the double-digit magnitude.

Year to date, Mazda has sold 215,408 vehicles, down 6.7 percent.

Mitsubishi: Little to Brag About

Mitsubishi Motors sold 7,378 vehicles in September, down 39 percent from the 12,102 sales in September 2007, on an average daily selling rate.

Galant sales were 2,605 for a 1.1-percent increase. Lancer Evolution sales were up 154 percent.

Beyond that, Mitsubishi provides no other details on its monthly sales reports.

Subaru: Up Run Ends

After bucking the trend, Subaru couldn't fight the economic wave any longer. In September, the Japanese automaker reported an 11.8-percent decline in sales. Still, Subaru is up 4 percent for the year to date for a record market share.

Forester sales soared 28 percent in September. The Legacy sedan had its best September ever with a 14-percent increase over a year ago. Impreza sales were off 2 percent in September, but remain 11 percent ahead of last year for the first nine months. Outback sales nosedived 46 percent and Tribeca sales, struggling all year, were down 57 percent to a mere 741 units.

"We are up 4 percent in total sales for the year and the Subaru Impreza, Forester and Legacy Sedan are on record pace with their best 9 months results ever," said Tim Colbeck, Subaru vice president of sales, in a statement. "Subaru represents a sensible decision in
these volatile times."

Added Thomas J. Doll, Subaru executive vice president, the automaker's models offer a good alternative to SUVs.

Audi: New Models Buoy Sales

Audi of America sold 7,584 vehicles in September, a decrease of 5.4 percent from a year ago. New models, including the A4, A5 and R8, helped buoy the German marque's sales.

"Demand for the new A4 boosted our overall sales by more than one thousand units over August's figures. In addition, increased sales of our A5 and R8 models point to the continued strength of Audi's portfolio of all-new, progressive luxury autos," Johan de Nysschen, executive vice president, Audi of America, said in a statement.

Audi combines sales of the A5 and S5, which totaled 719 vehicles compared to the 115 S5 models sold a year ago. R8 sales rose to 73 from 67 a year ago. Those were the only models Audi had in positive territory. The rest of Audi's line, except for the A6/S6, which had a sales slip of 3.2 percent, saw double-digit declines.

Audi's year-to-date sales are off 3.9 percent.

BMW: BMW Slides; Mini Short of Cars 

The BMW Group sold 18,506 BMW and Mini-branded vehicles in September, a 25.8-percent decrease from a year ago.
 
Sales of BMW brand vehicles decreased 29.5 percent in September. Car sales were off by 35.9 percent and SUV sales were down 5.7 percent.

Jim O'Donnell, president of BMW of North America, LLC, noted in the company's statement that BMW has a number of new models hitting the market, including the freshened 3-Series, diesel-powered versions of the 3-Series and X5 SUV and the 7-Series in early 2009.
 
Even Mini sales were down, with the brand selling 3,762 automobiles, a 6.7-percent drop September 2007. Company executives blamed a lack of inventory for the decline.

"Tight inventories restricted September Mini sales, which were 269 units below prior year levels," said Jim McDowell, Miniv USA vice president, in a statement. "We ended the month with only a six-day supply of cars in our retailers' showrooms. In the coming month, we look forward to increased production for our market to help replenish our dealer stocks."

Year-to-date sales for the BMW Group are off 4.8 percent with BMW down 9.6 percent and Mini up 27.4 percent.

Daimler: Mercedes Cools; Smart Sizzles
 
Daimler AG reported September sales of more than 20,500 units, off nearly 9 percent compared with September 2007. For the year, the company's U.S. sales were up more than 8 percent.
 
The fates of the company's two major brands in the American market have continued to diverge. Mercedes-Benz brand sales were off more than 16 percent for the month and are down nearly 2 percent for the year-to-date. That remains among the best 2008 performances by luxury brands, but it is directionally disappointing to the company. Even the flagship of European luxury brands apparently can't withstand the huge headwinds that are battering American car buyers these days.
 
Meanwhile, however, Daimler appears to be able to sell just about every smart car it can import. Smart sales in this, its first year in the U.S. market, have already totaled more than 18,000 vehicles. The company said that buyers are attracted to Smart for "a solution to high gas prices, a reduced environmental footprint, and increased urban mobility on congested city streets."

Porsche: Sales Sliced by Nearly Half

Porsche Cars North America, sold 1,458 vehicles in September, a 45-percent dive from last September's record-breaking 2,641 vehicles.

"This month's industry results have confirmed our belief that the economy and its effect on luxury brands such as Porsche is not a temporary one and that the sales landscape has changed for the foreseeable future," Detlev von Platen, President and CEO of Porsche Cars North America, Inc., said in a statement.

Cayenne sales were down 22 percent, but it was ub its core sports car business that Porsche got socked. In total, Porsche sold 771 units of the Boxster, Cayman and 911, down from 1,683 sold last September. The new 911 arrived in the U.S. on Sept. 25 and sold 347 in its first week, Porsche said.

Despite the ugly sales picture, don't expect incentives to move Porsche sports cars as have other luxury brands.
 
"Unfortunately, the market squeeze has seen even the best brands relent to incentives. Porsche has not and will not; instead, we will align our inventory and sales objective to a level that realistically reflects current demand," said von Platen.

He added: "Right now, our paramount priority is to protect the integrity of our brand and the value of our products, and this means reaffirming our policy of refraining from incentive driven volume."

For the first nine months of the year, Porsche has sold 21,076 vehicles, down from 26,278 in the year-ago period. Cayenne sales are up one percent but sports car sales are down by about 5,000 units.

Volkswagen: Jetta Saves the Day

Volkswagen sold 17,109 vehicles in September, a 9.4-percent decline from September a year ago. That puts Volkswagen ahead by a scant 0.2 percent for the year to date.

"This is the toughest economy we've seen in a long time" Mark Barnes, Volkswagen of America's COO said in a statement. "We're extremely pleased that we are still ahead of last year's sales."

Volkswagen's strength is coming strictly from its volume-leading Jetta. The automaker just launched the new diesel-powered Jetta TDI and Jetta SportWagen, which are selling as fast as dealers receive them, the company said. In addition, VW sold 1,077 units of its new Tiguan and 375 of its new Chrysler-based Routan minivan. In the midst of major product launches, VW is introducing the CC as well.

The rest of its line, except for the Tourag, which saw sales down only 7 percent, showed hefty double-digit decreases: Beetle sales were off 39 percent; Eos sales were down 31 percent; Rabbit sales declined 30 percent; GTI sales fell 38 percent; R32 sales were off 49 percent; and Passat sales plummeted 51 percent. 

Hyundai: Record-Low Sales

Hyundai sold of 24,765 for the month of September, a 25-percent decrease from September 2007. Worse, Hyundai sales tumbled 40 percent between August and September to its lowest volume since January of this year. January 2008 was Hyundai's lowest sales month since Edmunds.com started keeping such records in January 2002.
 
"As consumers tighten their spending due to the uncertain economic times, we are experiencing, we are certainly feeling the pinch, as I am sure every other manufacturer is," Dave Zuchowski, Hyundai Motor America's vice president of national sales, said in a statement. "While we are disappointed in September sales results, we believe it is consistent with that happened in the overall industry. But we feel Hyundai is well positioned to weather these difficult economic times with a full lineup of vehicles that offer some of the best value, fuel economy, safety and quality in the industry."

Sales were down on every Hyundai model, some sharply. Meantime, Hyundai sold 1,029 units of the just-launched Genesis entry-luxury car.

Kia: Sole Sales Increase Is from Rondo

Kia Motors America sold 17,383 vehicles in September, down from 24,087 in September last year.

Only the Rondo multi-activity vehicle saw a sales increase - a 3 percent increase. The new Borrego SUV, that just went on sale, pitched in 192 units of sales.

Not surprisingly, sales of Kia's other SUVs, the Sedona and the Sportage, saw the largest decreases, but sales of its smaller, fuel-economy cars for budget-minde buyers were also down.

That didn't stop Kia execs from putting as positive spin as they could on the situation.

"Considering the current economic climate we are pleased to see consumers recognizing and appreciating our passenger cars for the value, safety and fuel efficiency they bring to the market," Tom Loveless, vice president of sales, said in the company's statement.

For the year to date, Kia has sold 228,088 vehicles, down from 232,043 sold a year ago. Car sales are up 17.2 percent for the year to date, Rondo sales are up 38.4 percent. In addition Optima and Rio posted year-to-date sales increases of 31.5 and 21.7 percent.

*Percentage decreases in chart are based on a daily selling rate; September 2008 had 24 selling days while September 2007 had 25 selling days.

Jessica Caldwell, Edmunds.com's director of pricing and industry analysis, provided the analysis for this report.

Graphic by Robert Holland

Photos by manufacturers and Edmunds.com
1- Chevrolet Malibu
2 - Ford Flex
3 - Chrysler minivans
4 - Toyota Yaris
5 - Nissan Altima
6 - Honda Fit
7 - Mazda6
8 - Audi A5
9 - smart fortwo
10 - Volkswagen Jetta
11 - Hyundai Genesis

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.