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Economic woes spread across nation
The credit crisis that exploded last month left a blast crater in an already sinking economy, and some of the victims emerged to tell their tales Wednesday.
Thousands of finance jobs were lost from the New York epicenter, where Wall Street firms folded en masse, to the West Coast, where two major banks were closed.
Sales at Ford, Chrysler and other automakers plummeted by a third as customers and dealers reported being unable to get loans — threatening the already teetering finances of Detroit’s Big Three.
U.S. manufacturing — which was kept afloat by robust exports earlier this year — sank into recession as companies shut off orders, an industry group reported, while Washington’s airport authority and other municipalities and corporations said they had to postpone projects financed by bonds.
“Welcome to the recession,” said Daniel North, chief economist for credit insurer Euler Hermes ACI. “The combined weight of high energy prices and a ruined housing market is now being compounded by the ever-worsening conditions in the credit markets.”
Every industry from manufacturing and housing to services was hit by record declines last month in a credit manager’s index that Mr. North compiles, with businesses using words like “tough” and “brutal” to describe conditions in their areas, he said.
“No one will lend for fear that the financial system is on the verge of a meltdown,” he said. “The credit markets need a big shot of confidence to be unclogged.”
Ford Motor Co. reported a 34 percent plunge in September sales from a year ago, while Chrysler sales tumbled 33 percent and Japan’s big three automakers — Toyota, Honda and Nissan — reported similar drops. GM bucked the trend with a milder 16 percent decline, thanks to its offer of employee pricing on cars.
“It was tantamount, really, to a natural disaster,” said George Pipas, a Ford sales analyst, adding that sales were “extremely weak” at the end of the month when the impact from the credit crisis on Wall Street filtered down to Main Street.
Nine in 10 auto sales are financed with loans, which have become harder to get. Many consumers who hoped to use home-equity loans to purchase cars have seen their credit lines reduced or shut down. Even consumers with good credit ratings have been reluctant to buy cars in the uncertain economic environment, the car companies said.
Surging borrowing costs may cause a 40 percent increase in dealer closures this year as auto companies encounter difficulty securing short-term financing for their inventories of new cars, according to the National Automobile Dealers Association.
About the Author
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