Credit crunches carmakers

On the day that U.S. auto executives appealed to Congress for a $25 billion bailout, General Motors Corp. reported that its U.S. sales plummeted 41 percent in November compared with a year ago. Ford Motor Co. announced its sales dropped 31 percent, and Chrysler said its sales plunged 47 percent.

As credit remained tight, retirement accounts continued to be decimated, unemployment jumped and the recession deepened last month, the plunging price of gasoline was not enough to generate a rebound in auto sales.

The U.S. sales of Toyota Motor Corp., which may surpass General Motors as the world’s largest auto company this year, declined by 34 percent.

Across the industry, light-vehicle sales fell for the 13th straight month in November. A slide that long hasn’t occurred for 17 years.

On Monday, the National Bureau of Economic Research, a private, nonprofit research organization that is the official arbiter of the U.S. business cycle, announced that the U.S. economy dipped into recession in December 2007, the month before U.S. auto sales began declining from year-earlier levels.

“The economy continues to weaken, and auto sales reflect this reality,” said Jim Farley, Ford group vice president for marketing and communications.

All of Ford’s brands suffered sales declines last month, as did each of General Motors’ eight divisions. Sales of the Hummer sports utility vehicle, which GM has put on the block, were down 64 percent.

Not even plunging gas prices could stem the tide. After averaging more than $3.50 per gallon for the first 10 months of the year, the price of gas averaged a relatively cheap $2.11 per gallon in November, according to AAA.

Until 2008, vehicle sales in the United States averaged nearly 17 million units per year this decade. This year, the seasonally adjusted annualized selling rate has declined from 15.1 million vehicles in March to an average of less than 11 million in October and November.

“Due to tight credit conditions, there were fewer financing incentives out there,” said Brian Bethune, chief financial economist of IHS Global Insight. And the financing incentives that were available had been scaled back.

“Financing is the key driver of drivers buying more vehicles,” he said.

The auto industry has been especially hard hit by the credit crunch. So much so, in fact, that the Federal Reserve announced late last month that it would be purchasing $200 billion in consumer-related asset-backed securities, including those backed by auto loans.

In addition, GMAC, the auto-financing company partly owned by GM and controlled by Chrysler’s owner, Cerberus, announced last month that it would be applying to become a bank holding company. That would make it eligible to seek funds from the $700 billion Troubled Asset Relief Program, which has been providing capital to troubled banks.