A 25 percent decline in sales of light trucks and sport-utility vehicles in July dragged the auto industry to one of its weakest months on record, with Friday's results providing more evidence that 2008 could be among the worst years ever.
In July, Americans bought 1.14 million vehicles, 13 percent fewer than a year earlier.
Among the hardest hit were carmakers that make a lot of trucks: Chrysler was down 29 percent, while Ford Motor Co. and Toyota Motor Corp. were also down double-digits, according to Autodata Corp.
But when it came to bad news, it was hard to beat General Motors Corp. GM not only saw sales slide 26 percent in the period, but it also reported its third-worst earnings in history Friday, losing $15.5 billion in the second quarter.
Overall, it was the eighth straight month of sales declines for the world's automakers.
While weak sales figures have become commonplace, industry analyst George Magliano of Global Insight contended that "it was not simply more of the same," because July is traditionally one of the strongest selling months and carmakers have been offering huge incentives to boost sales.
"July was absolutely horrendous," Magliano said.
Sales of fuel-efficient passenger cars -- up 0.3 percent industrywide in July -- benefited a select few. Nissan Motor Co. was up 8.5 percent for the month. Kia Motor Co. and Subaru Motor Co. both reported sales gains of more than 5 percent.
Honda Motor Co, which has been strong for much of the year, saw a 1.6 percent sales setback in July, which it blamed in part on low inventory and increased demand of small cars like Civics.
As in recent months, many carmakers pointed a finger at high gas prices, slumping consumer confidence, and weakness in pickup and SUV sales coupled with shortages of small cars. They have added tighter credit to the list, saying that tens of thousands of customers who would have been eligible for financing a year ago are being turned away today because lenders are being cautious when writing loans.
Another new wrinkle: Automakers are taking huge losses when selling large vehicles coming off leases.
GM said on Fridaythat it took a $1.3 billion write-down associated with leasing losses at GMAC Financial Services, the automaker's 49-percent-held financing arm. The lender on Thursday had reported a $2.5 billion loss as residual values for leased SUVs and trucks plummeted.
And while GM will stay in the leasing business, it plans to significantly cut back financing and raise lease prices, moves also announced this week by Ford. Chrysler, meanwhile, said it would get out of leasing altogether.
Japanese carmakers, which have been punished less for their reliance on leasing thanks to relatively high residual values for their vehicles, stood firm.
"We remain committed to leasing as a valuable part of our business," said Bob Carter, general manager of U.S. sales for Toyota, adding that 16 percent of Toyota brand sales, and well above 30 percent of Lexus brand sales, are on leases.
That kind of confidence was absent in discussions about the immediate future of the industry. Ford predicted that total sales for 2008 could drop below 14.2 million vehicles, compared to 16.1 million sold in 2007. Toyota put the number at 14.5 million sales. Through July, sales are off 10.5 percent from last year, with only 8.55 million vehicles sold.
Analysts fear that 2009 could be worse than 2008, as the still-unwinding housing crunch keeps consumers feeling poor and businesses unable to buy the full-size pickups the industry depends upon for profits.
Carmakers have reacted by cutting production of trucks and SUVs, laying off or buying out employees, closing plants and beefing up production of small cars, which are in short supply.
GM estimated that, on an annual basis, as many as 300,000 sales are being lost because of shortages of popular models, while Toyota said it had less than a 10-day supply on several models, including a 1.5-day inventory of its Prius hybrid. In July, Toyota said it would begin producing the Prius in the U.S. to help meet demand.
In downtown Los Angeles, the Honda dealership had only one Honda Civic hybrid on the lot this week, and a salesman was asking $3,000 over the sticker price.
The same night, a Chevrolet dealership in Glendale, Calif., was brimming with Trailblazer SUVs and Silverado pickups, but devoid of customers. That's been the story for GM, which has seen year-to-date sales slide by 18 percent and losses through the first six months total $18.8 billion.
Including the GMAC write-off, GM's second-quarter results included $9.1 billion in charges, with more than $6 billion tied to worker buy-outs and liabilities associated with its former parts division, Delphi Corp., as well as a $197-million charge related to a strike at a key supplier.
"Clearly, it was a kitchen-sink quarter for GM," said analyst Mark Warnsman of Calyon Securities (USA) Inc., referring to the company's apparent desire to get all the bad news out at once. "But they've had them in the past, and the kitchen sink keeps coming back."
Excluding the one-time items, GM had a loss for the quarter of $6.3 billion, or $11.21 a share. Analysts were expecting a loss of $2.62 a share. A year ago, GM posted a second-quarter net profit of $891 million, or $1.56 a share.
GM said total revenue slid by 18 percent in the three months ending June 30, falling to $38.2 billion from $46.7 billion a year ago. GM shares fell 84 cents, or 7.6 percent, to $10.23.
