Auto Makers Close Books on Awful Year, Face More Ills

U.S. auto sales tumbled again in December, capping one of the worst years for the industry in decades and solidifying the view that more turmoil lies ahead in 2009.

For the month, sales of cars and light trucks fell 36% to 896,124 vehicles, according to Autodata Corp, a Woodcliff Lake, N.J., research firm. That is an improvement over both November and October; still, it was the fourth month in a row that sales failed to exceed one million vehicles.

For the full year, U.S. auto sales declined 18% to 13.24 million vehicles -- the lowest total since 1992, Autodata said.

Continuing the pattern of recent months, December's vehicle sales fell as cash-strapped Americans simply stayed away from dealerships or had difficulty securing auto loans. For many consumers, worries about losing their jobs and sinking home values trumped the year-end rebates and financing deals auto makers rolled out in the last few weeks.

The months ahead are likely bring more of the same in a slow economy, auto makers said. "We expect the first half of 2009 to feel a lot like the last months of 2008," Emily Kolinski Morris, an economist at Ford Motor Co., said in a conference call, noting that recent data showed consumer confidence and manufacturing activity at deep lows.

While auto makers, U.S. and foreign alike, suffered significant declines in December, Chrysler LLC was the hardest hit. The company, which was dogged by concerns it could run out of money as it pleaded for a federal bailout, said sales fell 53% to 89,813 vehicles.

General Motors Corp., which like Chrysler sought and eventually received emergency loans from the U.S. government, reported its vehicle sales fell 31% to 220,030 cars and trucks. Ford's fell 32% to 138,325 vehicles, and U.S. sales for Toyota Motor Corp. declined 37% to 141,949.

In a sign of how auto makers of all stripes are hurting, BMW AG reported a sales drop of 36%. In past downturns, luxury car maker fared better than mainstream manufacturers because wealthy customers had the means to continue buying or leasing. BMW said tight credit has damped U.S. sales.

One theme of the year was the resurgence of passenger cars, as gas prices soared to $4 a gallon last spring. Last year marked the first time since 2001 that cars outsold light trucks. Sales of passenger cars had fallen steadily since the 1980s as initially minivans and then SUVs came into vogue.

[Slump Continues]

Even though gas prices have eased to under $2 a gallon, pickups and SUVs may still be a tough sell. "We believe the pendulum will continue to swing toward cars in the years to come," Ford sales analyst George Pipas said.

Because of growing inventories, especially passenger cars, Jim Farley, Ford's global vice president for sales and marketing, said he expects to see heavy incentives to continue industrywide early in the year. For example, Toyota said Monday it will offer a new "cash back to consumer" program to boost sales in January.

"The biggest issue we have seen is the lack of people coming through the door," Toyota executive Jim Lentz said in a conference call.

As car demand slumps, Toyota continues to scale back. Tuesday, Toyota said it would suspend production in Japan for a total of 11 days in February and March.

While Ford continued to reduce its sales of low-margin sales to rental-car companies and other fleet customers, GM used fleet sales to prop up its December total as retail sales to individual customers at dealerships fell about 41%.

For the full year, GM's sales fell 23% to 2.95 million vehicles, Ford's declined 21% to 1.98 million and Toyota's U.S. sales declined 15% to 2.22 million vehicles. Chrysler was the No. 4 manufacturer in 2008, with sales of 1.45 million vehicles, down 30%.

—Kate Linebaugh and John F. Murphy contributed to this article.

Write to Sharon Terlep at sharon.terlep@dowjones.com and Matthew Dolan at matthew.dolan@wsj.com

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