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September 4th, 2008

Second Half of ‘08: Challenges Remains for Big 3

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Things won’t be getting any better for Ford as the year goes on:

‘We expect the second half of 2008 will be more challenging than the first half, as weak economic conditions and the consumer-credit crunch continues.’ — Jim Farley, VP of Marketing and Communications, Ford MC

Auto executives have no choice but to be honest with themselves. Economic conditions have put a severe crimp in consumers’ ability to support the auto industry. The Big Three — General Motors, Ford, and Chrysler — all posted big losses in their August US-sales report, giving way to a dimmer outlook of sales through the end of the year.

Ford’s sales dropped 26.6% in August, exceeding forecasts of a 20.9% decline. Ford’s one time “bread and butter,” sales of the F-Series pickup truck, dropped 41.6%. Ford’s executives were forced to trim projections for the second half of the year by 50,000 to 890,000.

Chrysler fared the worst, posting an August sales decline of 34% to 110,235. On the bright side, sales of Chrysler’s Town and Country Minivan rose 15%, and the Charger sedan by 3%.

GM auto sales declined 20.3% to 307,285 units in August, better than economic forecasts of a near 29% decline. The recent “employee pricing” promotion at GM has goosed the automaker’s sales past predictions. In an attempt to continue the encouraging trend, GM announced the employee-pricing promotion will be extended through September 30, and will include 2009 models.

The auto industry, as a whole, spent an average of $2,642 per vehicle in incentives last month, up 7% from a year ago but down slightly from July, according to car-buying research Web site Edmunds.com.

GM still plans on strong production through the end of the year. The automaker plans on producing 920,000 cars and trucks in the third quarter of 2008 — 30,000 more units than Ford plans on producing through the rest of the year — and 875,000 units in the fourth quarter.

“It’s really too early for anyone to declare victory on the economy in terms of it having turned the corner,” GM sales analyst Mike DiGiovanni said in a conference call. “But it appears to us that there’s a number of positive developments that indicate we may be at or near the bottom of the economic trough …”

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2 Responses to “Second Half of ‘08: Challenges Remains for Big 3”

  1. Rebecca Wilder Says: September 4th, 2008 at 8:10 pm

    I guess that the first monthly increase in auto sales in 6 months (8.8% in August) stems from the $2,642 worth of incentives. Productivity numbers indicated a decline in manufacturing productivity today – likely dragged down by the auto industry. It is so counter-intuitive, though, since exports are surging…mostly in manufacturing.
    I really don’t know what to think about the auto industry. Will a reduction in gas prices actually help? I tend to think not so much.

    Thanks, Tim. Rebecca

  2. Tim Manni Says: September 8th, 2008 at 1:39 pm

    In my opinion the reduction in gas prices we’re seeing now is only serving to make thing less worse. If prices can steadily drop back to comfortable levels than perhaps it will help. There seem to be too many other factors that have caused the die off in auto sales, not just gas prices…but that certainly hasn’t helped.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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