US car sales plunge in March

But automakers are encouraged by a recent increase in showroom traffic.

By , Staff writer

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    Mike Sieber looks at new cars at Pride Hyundai in Lynn, Mass. Hyundai, as well as GM and Ford, have launched incentive programs that help buyers with car payments if they lose their jobs.
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Automakers insist they see signs of life in the marketplace. But March was another dismal month for US car sales, as consumers clung to their old vehicles in the face of America’s economic woes.

General Motors sales were down 45 percent, compared with the same month a year ago. Ford slid 41 percent, while Chrysler was down 38 percent.

These results weren’t exactly a surprise, considering that the Big Three are mired in a historic slump. But still, the poor showing might:

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• Increase pressure on GM bondholders, as well as the United Auto Workers, to make concessions to keep GM out of bankruptcy.

• Give Chrysler a further shove toward an alliance with Fiat.

• Get Congress to seriously consider a government-sponsored “cash for clunkers” incentive program meant to break the industry’s downward spiral.

“It seems like the conditions that have pulled down auto sales in the US are still with us in full force,” says Jesse Toprak, a senior auto analyst at Edmunds.com.

Detroit is not alone in its dark tunnel. March sales at Toyota fell 39 percent, while Honda saw a 36 percent decline.

Whatever mistakes the traditional US auto industry has made in the past, it is the terrible economy that has made its current crisis so acute.

In a presentation Wednesday of monthly sales figures, US auto executives said they had some hope that the industry had finally hit bottom and that an uptick in business may be in sight.

Showroom traffic picked up last weekend, they said. GM and Chrysler officials were particularly relieved about President Obama’s declaration that the US will back warranties for their firms.

“We had a strong close at the end of the month as customers responded to strong incentives,” said Mark LaNeve, GM vice president of North America vehicle sales, service, and marketing.

Maybe so, but the overall numbers are still awful. US auto sales are now at an adjusted annual rate of about 8.9 million cars and light trucks. That’s about half the number of vehicles that were sold in 2007.

US consumers need to buy about 12 million vehicles a year just to replace their junked and worn-out ones, Edmunds.com estimates. The natural level of US demand should be about 14 million vehicles a year, Mr. Toprak says.

“The numbers just continue to show how weak the marketplace is,” he says.

Consumer confidence has moved slightly higher in recent weeks, points out Adam York, an economist with the Wachovia Economics Group.

But that does not mean consumers are about to bring out the checkbooks to replace cars and other big, durable goods.

“Consumers remain wary of the economic outlook.... Plans to buy a car dropped for the second straight month,” Mr. York noted in a marketplace analysis published Tuesday.

In recent days, both GM and Ford have introduced incentive programs aimed squarely at these hesitant buyers. GM’s “Total Confidence” and the “Ford Advantage Plan” each pledge to cover monthly payments for a period of time for buyers who lose their jobs.

In addition, Mr. Obama has said he wants to work with Congress to redirect some money from the stimulus legislation into a so-called cash-for-clunkers program, which would pay consumers to trade in old vehicles for more-fuel-efficient models.

On Wednesday, Sen. Charles Schumer (D) of New York and Sen. Dianne Feinstein (D) of California proposed to pay for such an effort with money from the stimulus package that Republican governors have declined to accept.

Meanwhile, Ed Montgomery, a University of Maryland economist appointed by Obama to help communities hurt by the auto industry’s decline, toured Michigan on Wednesday to meet with local politicians and see firsthand the misery caused by wave after wave of industry job losses.

“I get it,” Mr. Montgomery said after a three-hour meeting with Michigan Gov. Jennifer Granholm (D) at the state capital in Lansing. “People are hurting, and my focus is on, how do I help?”

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