Because of the nationwide housing slump and the squeeze on credit, many auto industry analysts are predicting a drop in U.S. auto sales by 500,000 or more vehicles in 2008, the worst performance since 1998. This prediction comes on the heels of a significant decrease in 2007 in which analysts expect sales of around 16 million vehicles down 2.6 percent from 2006’s 16.5 million
Like the rest of the country, Statesboro-area automotive dealers are feeling the effect of a struggling national economy with declining truck sales leading the way.
“We have seen our truck sales slow down,” said Frank Rozier, owner of Rozier Ford in Statesboro. “I don’t think we have slowed down has much as the national average, but we have seen a drop.”
Trucks, including pickups and sport utility vehicles, still make up 53 percent of the U.S. auto market, according to Autodata Corp., and they generate a big chunk of the Detroit Three’s revenue. But sales of pickups, many of them used as work trucks, slow down when housing sales drop.
Construction of single-family homes in the U.S. in October skidded to the lowest level in 16 years, and pickup sales followed, sliding 11.2 percent in November and 5.5 percent for the year. That’s particularly bad news for Ford Motor Co. and Chrysler LLC, who are both introducing new versions of their flagship pickups in 2008.
Rozier said with the downside - the decrease in truck sales - there has been an unexpected upside.
“On a positive note, we have seen our Ford, Lincoln, and Mercury car business really increase,” he said. “That is very encouraging, but trucks are our bread and butter. I can say that I am very optimistic about the truck business, because it is remaining steady.”
At Ford, the economy is clearly on the mind of Chief Executive Alan Mulally, who wouldn’t rule out factory worker layoffs if there’s a downturn next year.
‘‘With the economy, credit and housing being down, we will continue to watch that very carefully as we move into 2008,’’ he said. ‘‘The most important thing that we do is that we adjust our production to the real demand, which we’ve done very carefully and very decisively in this last year.’’
Not only could 2008 be a blow to Detroit’s earnings; it could hurt its pride. Detroit’s automakers slipped below 50 percent of the U.S. market for the first time this year, in July, and have been fighting to stay above 50 percent since. Toyota Motor Corp. is expected to overtake Ford as the No. 2 automaker in U.S. sales this year, and Toyota is also nipping at GM’s heels to be the world’s largest automaker.
Local dealership owner, Robbie Franklin, isn’t concerned about the rivalry between Toyota and GM – Franklin’s automotive group owns Franklin Toyota and Franklin Chevrolet.
“We’ve been through this before,” Franklin said. “There have been significant downturns in the national economy, and Bulloch County has not gone along with the trend.”
Franklin said the local economy has remained strong and stable and he isn’t expecting a significant decrease in sales for either dealership.
“I don’t know if 2008 will be a year for setting sales records,” he said. “But, I think sales will remain strong. We have a slump in the housing market here now, but our sales are good. I just think that things will hold up.”
Already Ford, GM and Chrysler have announced production cuts in the first quarter of next year in anticipation of slowing demand. “The Detroit Three will bear the brunt of the industry sales decline due to brand weakness, planned production cutbacks, higher exposure in the pickup market and the migration of consumers to smaller, lower-priced vehicles in which the Detroit Three are less competitive,’’ Fitch Ratings analyst Mark Oline wrote in a research note.
Throw in high oil prices, rising adjustable rate mortgages, sliding home values and the subprime mortgage mess and you’ve got a recipe for a down U.S. sales year for not just pickups but for all autos. Many analysts say car and truck buyers may stay on the sidelines or look at used vehicles while the economy sputters.
‘‘The mode for next year seems to be get through the year,’’ said Jeff Schuster, executive director of global forecasting for J.D. Power and Associates.
Franklin doesn’t look at next year as a time for “just getting through.”
“Our area has always done better than the nation as a whole,” he said. “We have a strong economy here, just look around. Things may be a little slower, but that’s okay. I still think we will be just fine, and I think sales will be good.”