U.S. auto sales dropped by more than 40 percent in February to the lowest level in almost three decades as Americans pulled back from taking on more debt in an economy showing signs of spiraling from bad to worse.
The results mark the 15th consecutive monthly drop in auto sales and come as a deepening recession in the United States and slowing global markets push major automakers to ratchet back production and ramp up discounts 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.
General Motors Corp
Sales at Ford Motor Co
Japanese automakers fared only slightly better with sales drops of 37 percent at Toyota Motor Corp <7203.T> and Nissan Motor Co <7201.T> and 38 percent at Honda Motor Co. <7267.T>
GM said the industry-wide sales plunge brought February sales to the lowest level for the month since 1967.
Automakers said still-incomplete sales numbers pointed toward overall sales for the month of about 695,000 cars, trucks and SUVs -- or about 9 million units on the annualized basis tracked by industry analysts.
That annualized sales rate would represent the lowest result since about 1982, based on the initial sales data.
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. Americans are hunkered down.
Toyota, which passed GM as the industry's largest automaker last year, said earlier that it had applied for a Japanese government loan to help its finance arm cut funding costs, showing how the industry's crisis was hitting its best-capitalized player.
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 by losing revenue in order to keep inventories in check.
HOPES FOR SECOND-HALF TURNAROUND FADING
The No. 2 U.S. automaker has held out hope that sales and the U.S. economy could begin to recover by the second half of the year. It said on Tuesday, however, that nothing in the grim February results supported that 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 levels of the past four months.
GM and Ford estimated sales of cars and trucks through showrooms to individual car shoppers dropped to an annualized rate of 7 million to 7.5 million in February, down from a rate of more than 8 million in recent months.
That contraction came despite steeper discounts on offer. Industry-tracking firm Edmunds.com estimated that incentives, including rebates and low-cost financing, rose 16 percent from a year earlier to an average of just over $2,900 per vehicle.
Chrysler LLC, which has been 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.
Korea's Hyundai Motor Co <005380.KS> outperformed again in a collapsing market. Its sales were down only 1.5 percent.
Hyundai has been buoyed by a highly-touted promotion that allows Americans to return new cars if they lose their jobs.
(Reporting by Kevin Krolicki, editing by Matthew Lewis)