Bad News for Auto Industry

Year-end auto clear-out sales could start as early as this week, a reaction to the worst October sales, per-capita, since World War II.

• General Motors October sales fell 45 percent compared with October 2007.
• Chrysler was down about 35 percent
• Mercedes-Benz posted a 34.3 percent sales decline
• Nissan, sales were down 33.6 percent
• Hyundai's October sales fell 31.1 percent
• Ford 30 percent
• Honda 25 percent
• Toyota 23 percent

Analysts had expected a massive drop in sales with almost every economic indicator working against auto companies. Consumer confidence has fallen to record lows, and banks and finance companies are either cutting the amount they will loan or lending only to consumers with great credit.

Projections from GM and Ford have October sales at their worst level since the 1970s. And when you take into account population growth, you have to go back to just after World War II, when companies were shifting back to car production from tanks and Jeeps, to find numbers this bad, DiGiovanni said.

In response, companies are doing the only thing they can do: cutting prices. GM will start its year-end sales event this week instead of waiting until after Thanksgiving as it typically does. Chrysler extended some discounts it began offering last month, and LaNeve said he expects Toyota and Nissan to continue their marketing and incentive offers.

At Ford, GM and Chrysler, sales have been down all year, but the reasons for the drops have changed. During the first few months of the year, high gas prices were pushing consumers out of trucks and sport utility vehicles into cars and crossovers. Toyota and Honda gained in those months because they had more of the small cars people wanted to buy.

But as the year continued, the pain spread. Jittery banks and finance companies began to tighten credit standards, making it harder for customers without superior credit to get loans.

General Motors Acceptance Corp., a lender co-owned by GM and private capital company Cerberus, stopped writing loans to consumers with credit scores lower than 700. Nationwide, the average credit score is about 692, according to Experian, one of the three major national credit bureaus.

In the past several weeks, analysts said consumers getting rejected for credit are the least of the industry's problems. More problematic is the fact that people just aren't shopping for cars.