U.S. auto sales dropped by more than 41 percent in February to the lowest level in almost three decades as deepening economic uncertainty drove Americans away from big purchases and new debt despite aggressive discounts from major automakers.
General Motors Corp, which is racing to complete a restructuring plan this month to keep it from bankruptcy, led the sinking industry lower with a 53 percent drop in sales.
The results mark the 16th consecutive monthly drop in auto sales and come as a deepening recession in the United States and slowing global markets have pushed automakers to ratchet back production, ramp up discounts and seek government financing in a bid to survive.
In our view, we are in an automotive depression, said Standard & Poor's equity analyst Efraim Levy.
Shell-shocked consumers fearful for their jobs, the value of their homes and stock market assets are wary of making the sizable discretionary purchases, he said.
Sales at Ford Motor Co, now considered the best-positioned of the embattled U.S. automakers, dropped 48 percent in February. Chrysler LLC posted a drop of 44 percent.
Japanese automakers fared only slightly better with sales drops of 37 percent at Toyota Motor Corp and Nissan Motor Co and 38 percent at Honda Motor Co.
GM, which has been kept afloat with $13.4 billion in U.S. government loans and needs more aid this month, said the industry-wide sales plunge brought February sales to the lowest level for the month since 1967.
Overall sales fell to 9.1 million vehicles on the annualized basis tracked by analysts, the lowest level on that basis since December 1981.
These are obviously unsustainable levels and will cause almost every major automaker across the world to seek government aid, said GM's chief sales analyst Mike DiGiovanni.
Toyota, which passed GM as the world's largest automaker last year, said earlier it had applied for a Japanese government loan to help its finance arm cut funding costs.
U.S. auto sales account for as much as one-fifth of retail sales. The results made it certain the battered sector will be a further drag on a weakening economy in the current quarter.
Ford and GM responded to the weak sales results by dropping planned production for the second quarter. GM cut its quarterly production plan by 34 percent.
Ford said it would cut quarterly production by an even deeper 38 percent, saying it would take a hit on the lost revenue in order to keep inventories in check.
HOPES FOR SECOND-HALF TURNAROUND DEBATED
Ford and Toyota have held out hope that sales and the U.S. economy could begin to recover by the second half of the year.
Toyota said it was still banking on a turnaround in the U.S. market at some point this summer but said the timing remained in doubt.
It's just a question of when in this summer we start to push off this bottom, said Bob Carter, general manager of Toyota's flagship brand in the United States. We remain confident that will happen and it's part of our plan.
But Ford executives said nothing in the grim February results supported that more optimistic view.
It may be that this month represents the bottom but there is no economic anchor to allow us to make that call definitively, said Ford economist Emily Kolinksi Morris.
S&P's Levy said he did not see an uptick in U.S. vehicle demand until the fourth quarter at the earliest.
Meanwhile, there were some worrying signs that retail sales in February had dropped from the already-weak but steadier levels of the past four months.
Sales of cars and trucks through showrooms dropped to an annualized rate of 7 million to 7.5 million in February, down from more than 8 million in recent months. The remainder of the industry's sales go to big fleet operators, like car rental companies and government agencies.
The retail sales contraction came despite steeper discounts. Industry-tracking firm Edmunds.com estimated incentives, including rebates and low-cost financing, rose 16 percent from a year earlier to an average of over $2,900.
Chrysler LLC, which has been among the hardest hit in the downturn and kept afloat by $4 billion in government aid, led the way on incentives, according to Edmunds.
Chrysler spent more than $6,000 per vehicle on incentives in February, followed by nearly $5,700 at its Dodge brand, Edmunds said.
Chrysler said it would keep a program of employee pricing and other discounts on offer through March, saying the program had helped it gain ground with remaining car buyers.
Meanwhile, South Korea's Hyundai Motor Co outperformed again in a collapsing market. Its sales were down only 1.5 percent. Hyundai affiliate Kia even eked out 85 more vehicle sales in February than its year-earlier tally.
Hyundai has been buoyed by a promotion that allows Americans to return new cars if they lose their jobs.
GM said it was studying the Hyundai offer and expected to roll out a program of its own intended to reassure consumers worried about new debt when the job market is tanking.
Separately, GM also said on Tuesday it would purchase Delphi Corp's steering business and accelerate payments to help the supplier exit bankruptcy.
(Reporting by Kevin Krolicki, editing by Matthew Lewis)