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January sales tumble more than expected at GM, Ford and Toyota as rental car companies slash purchases.

By Chris Isidore, CNNMoney.com senior writer
Last Updated: February 3, 2009: 2:33 PM ET


NEW YORK (CNNMoney.com) -- Auto sales tumbled even more than expected in January to their worst levels since at least 1982, as a pullback in purchases by rental car companies became the latest problem for the troubled industry.

General Motors (GM, Fortune 500) reported that its sales plunged 49% from a year ago. Ford Motor (F, Fortune 500) said sales fell 39% at its Ford, Lincoln and Mercury brands, and 40% overall when including sales at Volvo, which Ford is trying to sell.

But it wasn't just the U.S. automakers reporting sharply lower sales. Toyota Motor (TM) reported a 32% decrease in its U.S. sales, while sales at Honda Motor (HMC) tumbled 28%.

"We are facing unprecedented times in the industry, and no auto company is immune from current market conditions," said Dick Colliver, executive vice president of sales for American Honda, in a statement.

Those sales results were all worse than forecasts from sales tracker Edmunds.com, which had predicted that GM's sales would tumble 38%, along with a 30% drop at Ford. It had also forecast a 25% decline at Toyota and 23% drop at Honda.

These sharp drops are likely to be the rule, not the exception, as other major automakers report their sales results later in the day.

The heads of sales analysis for both GM and Ford said that the total industry will end with seasonally-adjusted annual sales rate, or SAAR, below the 10 million mark for the first time in more than 26 years. GM's Mike DiGiovanni said that January will mark the first month on record that auto sales in the United States trailed sales in China.

DiGiovanni and George Pipas, Ford's director of sales analysis, said the drop will be due primarily to significantly lower fleet sales to large business customers, such as rental car companies.

The plunge in demand for travel and rental cars caused leading companies such as Enterprise and former Ford unit Hertz (HTZ, Fortune 500) to pull back on their purchases last month.

As recently as December, fleet sales made up 22% of total industry sales, Pipas said. But he added that industrywide fleet sales plunged 65% to 70% in January from year-ago levels, and that they would account for no more than 12% of total industry sales in January.

GM said its fleet sales fell 80% in the month, and that only 1,000 cars were sold to rental companies. Ford's fleet sales were off 65% in January, following a 42% drop in December.

Chrysler LLC, which essentially shut its North American assembly lines during January, is expected to report even a bigger hit in sales to rental car companies during January.

The pain wasn't just in fleet sales though. GM reported a 38% drop in retail sales, while Ford reported that retail sales were down 27% from a year earlier. GM's sales' woes were widespread; out of nearly 100 models, virtually all posted double-digit percentage declines in sales.

Still, GM said its retail market share was unchanged from December levels, while Ford said it still expected to post a narrow gain in retail market share for the fourth straight month due to steeper sales declines by many of its rivals.

Pipas added that industrywide retail sales are expected to be flat or only slightly higher from the December and November sales levels, despite a new round of incentives geared toward getting consumers back into dealerships.

Even as credit starts to flow to potential car buyers, sales could fall to a 26-year low due to a sharp drop in purchases by car rental companies.

By Chris Isidore, CNNMoney.com senior writer


NEW YORK (CNNMoney.com) -- Consumers may have had an easier time getting car loans last month, but don't look for that to fuel a rebound in battered auto sales when automakers report their January sales Tuesday.

Auto finance units GMAC and Chrysler Financial received $7.5 billion in federal loans between them since the waning days of December. That allowed them to make more attractive financing offers to a wider range of potential clients.

But forecasts of a modest pickup in sales to consumers are being more than offset by a sharp plunge in purchases by rental car companies, which in a typical year can buy close to 3 million vehicles a year.

That means that the outlook for auto sales in January and through the first half of 2009 is likely to be even weaker than the industry was forecasting just a month ago.

In fact, the big decline in rental car company purchases could lead to the worst month for auto sales since 1982, even worse than any of the months reported in the disastrous fourth quarter. Sales tracker Edmunds.com is forecasting that industrywide U.S. sales fell 30% in January.

January is typically the start of the car buying season for rental car companies as they start gearing up for their busy summer months. But the rental car companies, hit by a sharp drop in demand and a weak market for selling their older vehicles, are in the process of pulling back on purchases.

Pat Farrell, a vice president at Enterprise Rental Car, said the company started trimming its purchases last summer as the slowdown in the economy became evident. The company, which also owns the National and Alamo brands, is the world's largest purchaser of cars -- it buys about 800,000 vehicles bought in a typical year.

When Enterprise experienced an even sharper drop in demand in October, it further cut back on its orders, a pullback that took three months to implement and will be felt in its January sales numbers.

Farrell would not disclose how much purchases were cut at the privately-held company, but he said it would be more than 10%. He said the company is holding onto vehicles about two months longer than normal to make up for the reduced purchases.

Richard Broome, senior vice president at Hertz (HTZ, Fortune 500), also pointed to a double-digit percentage drop in demand for its cars and the weak resale market as the reasons it is pulling back on new car purchases.

"The million dollar question is what will demand be during the summer. At this point it's impossible to forecast that," said Broome. "We want to remain in the market and remain one of the U.S. automakers' biggest customers. But the market dynamics now are not favorable."

Rebound in consumer sales won't be enough to end Detroit's pain
So far this year, General Motors (GM, Fortune 500) and Ford Motor (F, Fortune 500) have both trimmed their forecasts for 2009 sales from the depressed levels they were projecting in December when they submitted turnaround plans to Congress. GM executives specifically cited weak fleet sales and rental car company purchases when they discussed GM's lowered January sales forecast.

GM chief sales analyst Mike DiGiovanni told analysts late last month that a sharp drop in fleet sales could take the seasonally adjusted annual sales rate, or SAAR, below 10 million in January.

The industry SAAR, which was at 15.3 million a year ago even as the recession started, hasn't fallen short of the 10 million benchmark since 1982.

The only bright spot for the industry is that there could be a modest uptick in the sales of cars and trucks to consumers.

"We're clearly seeing stabilization in the retail [sales] rate in the U.S. market," DiGiovanni said last month.

But this slight uptick is not nearly enough to lead to a significant rebound in total sales any time soon, other experts say.

"As a rule right now, people are holding onto cars longer, whether it's consumers or rental car companies," said Jessica Caldwell, industry analyst. Edmunds.com

The easier financing probably won't woo consumers back into dealerships either -- not as long as there's so much uncertainty about the economy and the job market.

"You still have the economy crushing the consumer," said Bob Schnorbus, chief economist for J.D. Power & Associates. "If you have some easing of credit, maybe you're preventing a month-by-month spiraling downward. But at best we're looking for retail sales to be relatively flat."