Economic Downturn Hits Automakers Hard

The economic downturn that has been pounding the U.S. lately, along with tightening of the credit industry, has hit automakers hard. In this last month, every automaker took a beating. Sales across the board dropped 27% over the same time last year and the casualties are piling up:

• Chrysler has put the Viper brand up for sale
• GM put a For Sale sign on Hummer
• Ford is dropping Jaguar
• GM's oldest American dealership, Bell Motors, founded in 1923, has closed its doors.
• GM's largest dealership, Bill Heard Enterprises, which at its peak, had revenues of $2.5 billion, has filed for bankruptcy and has closed it remaining 13 stores.
  
• Dan Towbin's Hummer dealership in Las Vegas (one of the largest Hummer dealers in the U.S.), is the 8th Hummer dealer to close. Don't despair though, Dan is reopening - selling Smart cars and Vespa scooters.
• Volvo, Ford, and GM are closing plants that make low selling vehicles.
• PPG has closed plants.
• Dura Automotive has filed for bankruptcy.
• Holley has filed for bankruptcy protection.
• ASC, Delphi, and others have also filed for bankruptcy protection.
• GM reported a $15.5 billion second quarter loss; Ford lost $8.7 billion.
  

Unfortunately, the forecast is looking pretty gloomy. It is estimated that as many as 400-500 U.S. car dealers could close their doors within the next few months. Auto sales are expected to remain flat or drop even lower, until at least 2010 as consumers struggle with tight credit, high gas prices, and the troubled housing market. While September posted huge losses for just about every manufacturer, the North American Three have seen sales down between 16 and 24% for the first eight months of '08 as well.

What does the future hold? While the news media have been following the $700 billion bailout of the U.S. banking industry, the $25 billion package for American automotive manufacturers seemed to pass by almost unnoticed. The bailout, signed by President Bush yesterday, allows automakers to borrow much-needed funds at half the market rate with no repayment schedule for 5 years.

All I can say is "hang on, it's going to be a bumpy ride."