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Year’s end brings deals on vehicles

Experts estimate car sales will be lowest in 9 years

POSTED: January 11, 2008 5:04 a.m.
Today, on the last day of the year, there is a Northeast Georgia car dealer ready to make you a great deal on a new car.

Print and broadcast media has been filled in December with auto companies and local dealers offering end-of-the-year deals, including major price reductions and lower interest rates

However, holiday discounts failed to bring consumers out of their funk, and December sales are expected to fall about 4 percent, which would bring the year’s total for U.S. auto sales to 16.1 million vehicles, the lowest volume since 1998.

Sales have been hurt by consumer anxiety over gas prices, the housing crunch and the overall weakening economy.

Industry watchers warn that the 2008 auto sales performance could be even weaker.

Terry Hayes, whose family operates Chrysler, Dodge, Jeep, Buick, Cadillac, Pontiac, GMC and Chevrolet dealerships throughout Northeast Georgia, said that while it hasn’t necessarily been the worst of times, it hasn’t been the best either.

"The last week of the year is generally one of our busier times," Hayes said. "It’s been busier than normal, but not as good as in years past."

Hayes said that the domestic manufacturers are responding to the demand for more efficient cars.

"Chevrolet now has nine vehicles that get 30 miles per gallon. Chrysler has also come on board with vehicles that get better fuel mileage. They weren’t as geared up as the imports because the imports already sold small cars," Hayes said.

Chrysler and its Dodge and Jeep brands have been buoyed by the introduction in 2007 of a warranty on the vehicle drive train for as long as the original buyer owns the car.

Butch Miller, vice president and general manager of Milton Martin Honda in Gainesville, said that December has been good, but said that customers are more cautious than before.

"Our customers want to make sure they’re making the right kind of purchase," Miller said. "A lot of them will put purchases off because they want a value purchase, and we’re seeing that very clearly."

Miller said customers are asking more questions about mileage and vehicle reliability. When gas prices exceed $3 per gallon, customers become more aggressive in their search for a car with better mileage.

"I don’t know what it is about $3 a gallon, but consumers just can’t stand paying it,’ Miller said.

Miller predicted that 2008 would be a rather flat year for auto sales, including brands like Honda, which has seen double digit growth in recent years.

Bear Stearns analyst Peter Nesvold said in a recent note to investors that he’s even more concerned about 2008 sales than he was a year ago, since consumer sentiment and employment levels are continuing to deteriorate. Nesvold said the country hasn’t seen a meaningful downturn in auto sales in 15 years and is long overdue for one.

"In a nutshell, if consumers don’t feel good about the world or employment is slipping, they tend to delay major expenditures such as a new house or car, if possible," he said.

December is Ford Motor Co.’s last chance to hold on to its longtime position as the No. 2 automaker by U.S. sales. Toyota Motor Corp., which outsold Ford by 15,000 vehicles in November, is on track to overtake Ford this year.

Robert Barry, an auto analyst with Goldman Sachs, predicts Ford’s sales will fall 3 percent in December compared with a relatively weak December 2006. Barry said Ford is struggling because it’s at a low point in its product cycle, with a major redesign of the F-150 pickup and a new crossover not due out until next year. In the meantime, it’s being hurt by aggressive incentive spending by Toyota and other rivals.

Nesvold predicts Ford’s sales could fall as much as 12 percent in December, pointing out that the automaker’s newly rebadged Ford Taurus and Mercury Sable sedans and Taurus X crossover have seen disappointing results all fall. But Nesvold said the Ford Edge crossover and Ford’s smaller sport utility vehicles have held up well.

General Motors Corp. could see an even sharper decline of 14 percent due to a planned cutback in sales to rental fleets, Barry said. In a note to investors, Barry said he expects GM to cut fleet sales by 30 percent in December, the same amount the automaker cut fleet sales in November. Ford also has been slashing sales to rental fleets all year in an effort to shore up resale value and brand image.

Barry said Chrysler LLC will likely see double-digit drops in December, particularly since the automaker’s car sales shot up 48 percent last December thanks to brisk sales of the Chrysler Sebring and 300 sedans. Chrysler’s newly redesigned minivans could significantly boost December sales, Nesvold said. But if they don’t, analysts may have to lower their expectations for the vehicles.

Japanese automakers also are expecting to see lower sales in December, particularly as the housing crunch continues to dampen demand in California, their most important market.

Toprak predicts Toyota’s sales will be down 3 percent compared with last December, while Honda Motor Co.’s will fall 1 percent. Nissan Motor Co. will likely be flat, he said. Nissan has bucked the slow sales trend in recent months on the strength of its new Rogue crossover and Versa subcompact.

The Associated Press
contributed to this report



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