December closes dismal sales year

Light vehicle sales last month inspired all sorts of comparisons; nearly all of which were bad. Sales at General Motors and Ford, although better than some of the predictions, came in at levels not seen in nearly four decades. Industry-wide sales rates rivaled those last seen in the early 1980s.

As the year rolled on, sales volumes declined from being comparable to the late 1990s, then to the mid-90s, finally winding up at the worst since 1992 as the recession deepened. By the end of December, automakers had sold 2.9 million fewer cars and light trucks than they moved in 2007.

Chrysler sales tanked as would-be buyers, already scarce enough because of the grim economic conditions, were spooked by an almost constant barrage of reports about the automaker’s imminent demise. Cerberus Capital Management, owner of the majority of Chrysler, did little to help the perception with its efforts to unload Chrysler’s automotive business and a reluctance to provide additional capital to fund its operations. A steady outflow of executive talent was also seen by many as a sign of Chrysler’s weakness.

The decline in retail sales was accompanied by steep reductions in fleet sales as rental companies have been slashing their purchases because of the slowdown in their own business and the difficulty of disposing of used vehicles. Enterprise, the largest rental company in America, is cutting its purchases by up to 50 percent and keeping the vehicles longer. This is especially hard on sales of the Sebring and Avenger, which have depended heavily on fleet buys for volume.

On the brighter side, the Journey continues to be among the better-selling new vehicles introduced in 2008, doing much better than the Ford Flex. While Chrysler may have ceded the top spot in the minivan market to Honda for the year, Chrysler remains the leading producer in the segment. The Jeep Wrangler is still one of the top traditional sport-utility vehicles and the Patriot, Compass and Caliber are selling steadily.

Above all, Chrysler remained the fourth-largest automaker by sales for the month and for the year.

For the year, cars outsold trucks and import brands outsold domestics. Mini, Rolls Royce and Subaru were the only brands to beat their 2007 sales marks. Even most of the ultra-luxury vehicles took a hit as wealthy customers saw the value of their investment portfolios dwindle.

The outlook for 2009 is pretty bleak at this point. Most analysts and industry insiders see the current sales pace continuing at least through the first half of the year, meaning we could wind up with an even lower total number come next December. However, if the recession shows signs of receding and credit markets start to loosen up, there could be a mild rebound in the second half of the year. A boost may come from gas prices, which have remained very reasonable. If this trend continues, and futures can avoid the wild speculation that produced $4/gallon pump prices last summer, it could help sales of Chrysler’s truck-heavy product line. We’re already seeing a shift in consumer buying back to trucks, which claimed a majority of the market in December. Chrysler still needs to work on its car line, but that will still take at least another year.

The heady days of 16-million-plus sales will return; America scraps more than 12 million vehicles a year and there will be demand. However, it’s going to take some confidence and leadership from Cerberus to ensure that Chrysler is there to share in the recovery.