12/01/00- Updated 03:07 PM ET

'A storm is brewing' as auto sales skid By Earle Eldridge, USA TODAY

Automakers always expected the record sales pace of the past several years to cool, but the latest estimates suggest the slowdown is coming faster and harder than anticipated. It's coming in spite of industry efforts to push sales by offering generous rebates and cheap loans. The result could be layoffs, plant shutdowns and a reduction in overtime.

The effects may be most severe for General Motors, Ford Motor and DaimlerChrysler's Chrysler division, which face new competition from foreign automakers for their pickups and sport-utility vehicles. The American automakers have basked in the glow of trucks' big profit margins for several years.

"A storm is brewing," says analyst Rod Lache of Deutsche Banc Alex. Brown. "Each of the Big Three will be heavily impacted."

Analysts say the industry, drunk on a sizzling annual sales pace of close to 19 million vehicles earlier this year, stepped up production to match.

Now that the pace has slowed to about 16.5 million vehicles, several automakers are stuck with high inventories, forcing them to cut production and offer rebates.

In fact, DaimlerChrysler is expected to announce today that it will completely idle or cut back production at several Chrysler plants to correct high inventories. As many as half of Chrysler's 13 North American plants could feel the impact .

Analysts predict that when most automakers report November sales today, they will be down 3% to 5% from a year ago. If so, it will be the second consecutive month that sales have dropped. More important, analysts predict that seasonally adjusted annual sales will drop to 16.5 million from 17.2 million in November 1999.

Last year, automakers sold a record 16.9 million cars and trucks.

Some automakers already have warned that November sales would fall. GM officials said its sales would drop 4% to 7%. Ford and Chrysler are also expected to report declines.

Automakers say a slowdown was expected and say declines in coming months could reach double digits only because sales from November 1999 through April were outrageously strong.

"I wouldn't conclude that things are happening faster than previously thought," says George Pipas, market analyst at Ford. "We were at a pace that everybody knew wasn't sustainable."

But Wall Street analysts forecast a struggling auto market into next year and beyond, which could spook investors.

"We believe sales could be down 5% to 10% over the next six months," says analyst Michael Ward of Salomon Smith Barney. The market will read that as a downturn, he says.

"Our best guess is that U.S. demand peaked in 2000," he says. "We are looking for declines in both 2001 and 2002, with demand reaching a trough in 2003, an estimated 15% below peak."

http://www.usatoday.com/money/consumer/autos/mauto936.htm

-- Martin Thompson (mthom1927@aol.com), December 02, 2000

Answers

I read somewhere that the largest purchaser of automobiles is the US government. Maybe the government is scaling back on their purchasing which is whacking the industry. I can not find the number of cars the US and states purchase each year. Maybe someone can help with this.

-- David Williams (DAVIDWILL@prodigy.net), December 02, 2000.

Dec. 1, 2000, 9:12PM

Chrysler, Delphi, Ford plan layoffs Copyright 2000 Houston Chronicle News Services

Falling sales are forcing some of the biggest names in the U.S. auto business to lay off workers.

The big three automakers -- DaimlerChrysler, Ford Motor Co. and General Motors -- plus the biggest auto parts maker, Delphi Automotive Systems, offered some grim sales reports Friday. And all but GM said they are planning layoffs.

DaimlerChrysler said its U.S. car and light-truck sales fell 5 percent in November; Ford sales fell 8.2 percent, excluding import brands; and General Motors said sales, including its Saab unit, were down 8.1 percent.

DaimlerChrysler said it will idle seven of its North American assembly plants this month and Ford an unspecified number.

Delphi Automotive Systems said it will idle more than 1,700 workers in plants in Michigan, Ohio and New York as its North American car and light-truck production slows.

http://www.chron.com/cs/CDA/story.hts/business/761248

-- Martin Thompson (mthom1927@aol.com), December 02, 2000.