Automotive News - October 6, 2008 - 1 ® OCTOBER 6, 2008 Entire contents © 2008 Crain Communications Inc. All rights reserved. $155/YEAR; $5/COPY T H E G R E AT C O L L A P S E September was awful, and 2009 looks ugly Richard Truett Sept. 2008 sales, by automaker, % change from Sept. 2007 Nissan –37% Ford –36% Chrysler –33% Toyota –32% Honda –24% GM –16% Source: Automotive News Data Center and company sources Many dealers floored by floorplan limits, costs Donna Harris DETROIT — For the auto industry, September could be the start of a really bad stretch. Last month, U.S. light-vehicle sales declined 26.6 percent, and industry executives glumly predict that a turnaround won’t occur until 2010. Some analysts expect that U.S. sales this year could be as low as 13.0 million cars and trucks, a precipitous downturn from last year’s 16.2 million. Next year won’t be any better, predicted Ford Motor Co. CEO Alan Mulally. “We won’t see a recovery until 2010,” Mulally told reporters at the Paris auto show last week. General Motors COO Fritz Henderson was just as downbeat: “We are all under some pressure until 2010.” MORE TALES OF RETAILING Reaction mixed on Chrysler spiffs ➤ 4 40-42 Sales analysis and tables ➤ Toyota offers 0 percent loans ➤ 44 In September, U.S. sales dipped below 1 million units in a month for the first time since February 1993. And — uncharacteristically — the carnage was spread fairly evenly. No one was spared from a toxic mix of high gasoline prices, nationwide job losses and Wall Street’s financial crisis. Suzuki seeks floorplan partner ➤ 44 In recent weeks, each of the Detroit 3’s captives — GMAC Financial Services, Ford Credit and Chrysler Financial — has raised the interest rates it charges dealers for inventory financing by about half a percentage point. Major banks such as Bank of America and Wells Fargo also have increased interest rates on dealer inventories, or floorplans. At the same time, many lenders are demanding more collateral for floorplan loans. Some lenders are refusing to floorplan unprofitable dealerships, to the point of recalling their loans. And sluggish car sales have made a bad problem worse. U.S. new-vehicle see LEND, Page 43 Toyota stumbles After Toyota Motor Sales U.S.A.’s sales declined 32.3 percent in September — its worst sales downturn in 20 years — Toyota unleashed a 0 persee COLLAPSE, Page 42 The credit crisis — which has made lenders reluctant to finance dealerships’ vehicle inventories — is helping force hundreds of dealers out of business. The National Automobile Dealers Association projects that as many as 700 dealerships could close this year, out of 21,461 as of Jan. 1. The last decline of this magnitude occurred during the recession of the early 1990s. Dealers have fallen prey to poor sales, high gasoline prices and ruinous price wars. But a lack of credit is a big factor in this year’s shakeout, says NADA chief economist Paul Taylor. “Credit conditions need to be improved somehow, and quickly,” he says. Fuel frenzy At the Paris show last week, automakers offered a dozen ways to stretch a gallon of fuel. And for those who want to avoid gasoline altogether, automakers pitched electrics. Electric cars gain momentum Page 3 Volvo to produce hybrids Page 6 Designers make sedans look like coupes Page 8 Lexus IS250C: Hard-top convertible The small Mercedes-Benz GLK goes on sale next year. Amid a U.S. stall, Europeans think small Amid a soft U.S. economy, Europe’s automakers are adding small cars and superluxury sedans to their U.S. portfolios. Even Mercedes is going down-market with a small, entry-level car. This week, we highlight Europe’s product plans for the United States, starting on | PAGE 22 | A version of the Chevy Orlando concept is expected in the U.S. Complete Paris show coverage on our Web site. The Audi A1 may come to the U.S. See Page 6. PHOTOS BY PHILIP MEECH GMAC is out of leasing — at least for now Alysha Webb and Jesse Snyder GMAC Financial Services, the nation’s largest auto lessor as recently as midyear, virtually has stopped writing leases in the United States. In September, leases accounted for less than 2 percent of General Motors’ U.S. new-vehicle sales, according to J.D. Power and Associates. A year earlier, Power noted, GM’s leasing rate was 16.8 percent. Automakers and dealers use leases as sales tools for customers who seek lower monthly payments and a way to cover negative equity in their current vehicles. But the credit crisis forced Chrysler Financial to exit the leasing business this summer, and other lenders have cut back sharply on leasing. Leases accounted for 12.3 percent of all new-vehicle sales in September, Power reported. That’s down from 18.0 percent a year earlier. Last week, Mark LaNeve, GM’s vice president of North American NEWSPAPER sales, conceded that GM did “hardly any leasing in September.” During a conference call reporting monthly sales, LaNeve said GM wants GMAC to put more money into leasing. GMAC spokesman Mike Stoller said the company’s policy is not permanent. “At such a point as leasing makes sense, you will see a return to leasing,” he said. But GM COO Fritz Henderson appears pessimistic about GMAC’s possible return to leasing. Last week, he see GMAC, Page 43 Creditors aim to sell 8 Heard stores by Oct. 14 NEWSCOM Creditors are moving swiftly to sell the dealerships owned by bankrupt Bill Heard Enterprises Inc. They aim to complete the sales of 8 stores by Oct. 14. | PAGE 4 |

Table of Contents for the Digital Edition of Automotive News - October 6, 2008