Auto industry expects improved sales

November 29, 2008 at 12:00a.m.

November will be slightly better than October’s historic lows, but worse than last year.

NEW YORK (AP) — As the humbled captains of the U.S. auto industry spend the weekend preparing their second case for a federal bailout, their best argument may come in November’s auto sales figures.

Industry watchers and car dealers say they expect this month’s vehicle sales to come out slightly better than October’s historic lows, but increased incentives haven’t been enough to overcome tight credit, the crumbling economy and weak consumer confidence that are keeping consumers away from showrooms.

“All those major factors that had an impact on new-car demand so far this year are still with us,” said Jesse Toprak, executive director of industry analysis for the automotive Web site Edmunds.com.

Edmunds is expecting sales to drop 28 percent from a year ago to 850,000 units when automakers announce their November sales Tuesday. Barclays auto analyst Brian Johnson predicts a 32 percent plunge. Other analysts are just as pessimistic and expect U.S. car companies to take the biggest hit.

“Detroit Three automakers appear likely to once again lag the industry in both retail and total sales,” Citigroup analyst Itay Michaeli wrote in a report this week.

But if there’s a bright side, it’s that industry watchers are expecting a slight improvement over October’s total of 838,156 vehicles. October’s seasonally adjusted annual sales rate of 10.6 million vehicles was the worst in more than 25 years and far below the rate of 16 million a year earlier, according to Autodata Corp.

Analysts say a number of factors may have stabilized sales, the most obvious being the collapse in gasoline prices, which have shed 75 cents a gallon in the past month. The average price of regular gas nationwide was $1.84 on Friday, down 55 percent from the all-time high of $4.11 in July, according to auto club AAA, the Oil Price Information Service and Wright Express.

Automakers have ramped up sales incentives to near-record levels, as well. GM launched its annual “Red Tag” year-end sale earlier than usual and is knocking thousands of dollars off its vehicles. Toyota Motor Corp. extended its zero-percent financing offer on 12 vehicles through the end of the month, while Nissan Motor Co. launched a similar deal on some of its cars. Ford Motor Co. began offering employee pricing and other deals.

Edmunds says average industrywide incentive spending rose 15 percent from a year ago to $2,625 per vehicle in November. Among the Detroit Three automakers, incentive spending has been even higher.

Individual dealers have piled on even more deals as they seek to clear out built-up inventory.

“The companies’ sales results will come the same day they must submit a detailed plan to Congress that spells out how they will remain viable if they get $25 billion in government loans to stave off bankruptcy.

Some lawmakers and analysts have suggested General Motors Corp. and Chrysler LLC should use a prepackaged Chapter 11 bankruptcy filing as the best way to cancel unfavorable contracts and restructure their costs, but the companies have said that’s not a suitable option because consumers would be afraid to buy a car from a bankrupt company.