US auto sales drop in 2008, recovery unclear

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DETROIT — After a year in which U.S. auto sales tumbled 18 percent and GM had its worst year in nearly a half-century amid slack demand fueled by a terrible economic outlook and growing job worries, automakers are reluctant to predict when a recovery might occur.

An even sharper sales decline in December alone means that record high rebates and low-interest financing deals will stick around until at least February. But those deals will likely disappear as the remaining 2008 models are sold and inventories are lowered to match demand.

One automaker, Hyundai Motor America, is trying to woo skittish buyers by promising to let them return cars for up to a year if they lose their jobs and can't make the payments.

Similar bold moves might be necessary throughout the year.

Toyota Motor Corp. said Tuesday that it is suspending production at all 12 of its Japan plants for 11 days over February and March.

The last time Toyota halted production at all its Japan plants was in August 1993, when demand plunged because of a rising yen, and that was for only one day, according to the company.

"We are coping with a slump in global sales," Toyota spokesman Hideaki Homma said Tuesday. "Demand in the world auto market is so depressed that every model is falling sharply in sales."

Toyota last year suspended production at its auto plants in Alabama, Indiana and Texas for three months, and shut down output for two days in December at all its North American vehicle factories including five in the United States, one in Canada and another in Mexico.

Chrysler LLC also shut down its plants for a month in December, longer than the usual two-week break, while General Motors Corp. has said it would shut down a plant in Thailand for up to two months.

On Monday, automakers said U.S. sales fell to 13.2 million in 2008, down 18 percent from 16.1 million in 2007. Consulting firm IHS Global Insight predicts that U.S. sales will drop to 10.3 million this year as the economy continues to sputter.

In December alone, U.S. sales plunged 36 percent.

Most automakers were pessimistic about the first quarter outlook. After that, some were hopeful that President-elect Barack Obama's stimulus package would kick in, coupled with a loosening of credit that could bring people back to the showrooms.

Every major manufacturer reported drops of more than 30 percent in December. Leading the largest year-over-year drop since the Arab oil embargo days of 1973-74 was struggling Chrysler LLC, which sold 53 percent fewer vehicles than last December and 30 percent fewer in 2008 than in 2007.

GM's sales of 2.9 million vehicles last year were down 23 percent and came in at the lowest number in 49 years.

Even Toyota and Honda Motor Co., which earlier in the year had seen increases, saw declines in December that were larger than their U.S.-based competitors'. Toyota was down 37 percent and Honda 35 percent, compared with Ford Motor Co.'s 32 percent drop and GM's 31 percent slide. Nissan Motor Co. sales also dropped 31 percent.

Ford's sales for 2008 fell 21 percent from a year earlier, keeping the Dearborn automaker in third place in the U.S. auto sales race behind GM and Toyota for the second straight year.

Chrysler, which received $4 billion in federal loans, attributed its nasty sales drop to the company reducing sales to low-profit fleet buyers such as rental car companies.

Some smaller manufacturers, though, fared better. Subaru of America Inc. said its U.S. sales crept 0.3 percent higher in 2008 on stronger sales of its Forester and Impreza models.

Auto sales started the year slightly under 2007's pace, but by May, U.S.-based automakers were suffering as gasoline prices started to rise toward $4 per gallon and people shifted from buying pickup trucks and sport utility vehicles to smaller, more efficient cars.

Then, in July, as gas prices neared their peak and the economy started to falter, sales tumbled and never recovered the rest of the year, even though gas subsided to under $2 per gallon.

Lower gas prices have cut into high-mileage gas-electric hybrid vehicles toward the end of the year. Toyota reported sales of the Prius, the top-selling hybrid in the U.S., fell 45 percent last month.

But Jim Lentz, president of Toyota Motor Sales USA, Lentz was optimistic that hybrid sales would rebound.

"We're going to see fuel prices creep up a bit," he said. "I think the overall greening of America is going to see an increase in hybrid (sales) as well."

GM's December results were boosted by heavy sales incentives, including financing offers announced last week after the Treasury Department said it would give $5 billion in federal aid to the Detroit automaker's ailing financing arm, GMAC LLC.

Michael Martin, who owns Chevrolet and Saturn dealerships in Manassas, Va., said he saw customer traffic and phone calls pick up almost immediately.

"I'd like to see (the financing offers) really take hold over the next 30 to 45 days," Martin said. "Hopefully, we'll start seeing some real upticks."

But Mark LaNeve, GM's vice president for North American marketing, said he expects sales incentives to drop as GM sells down 2008 models. It still will be competitive in areas such as midsize cars, where Toyota has been offering $3,500 incentives on its top-selling Camry model, LaNeve said.

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AP Auto Writers Kimberly S. Johnson in Detroit and Dan Strumpf and Bree Fowler in New York contributed to this report.

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