US auto sales hit 25-year low

US auto sales plunged 32 per cent in October to lows unseen in a quarter-century led by a 45 per cent drop at General Motors Corp. in a collapse that hit every major automaker and offered little sign that the industry has hit bottom in its largest market.

Hurt by tighter terms on auto financing by skittish banks and finance companies and the worsening economy, US auto sales fell to their weakest monthly level since February 1983, according to sales data released on Monday.

The decline in US October sales represented the first results since word emerged last month of merger talks between GM and Chrysler LLC and seemed certain to strengthen calls for a new government aid package for the embattled US industry.

Auto sales for four European countries reporting on Monday showed the spreading effect of the slowdown. Sales fell 40 per cent in Spain and 19 per cent in Italy.

The US, the world's largest vehicle market, remains at the industry's vortex. October represented the weakest month for US auto sales on a per-capita basis since the end of World War II, GM said.

Sales for Toyota Motor Co. 7203.T dropped 23 per cent, Honda Motor Co. fell 25 percent, Ford Motor Co. was off 30 per cent, Nissan Motor Co. tumbled 33 per cent and Chrysler LLC sales fell 35 per cent. "The financial crisis has generated an abrupt constraint on economic activity," said Ford economist Emily Kolinski Morris.

Ford said it could reduce production of passenger cars and crossover vehicles in the coming weeks by cutting overtime and suspending work at some of its plants.

Industry-wide US sales of cars and light trucks dropped to 838,156 in October after falling below the one million threshold in September for the first time in 15 years. It marked the 12th consecutive monthly sales decline.

In the annualised terms tracked by analysts, the auto industry recorded a US sales rate of just under 10.6 million vehicles in October, down from over 16 million a year earlier, according to Autodata Corp.

That raised the stakes for an immediate and more aggressive round of discounting in November and December as automakers prepared to clear remaining 2008 model-year inventory in exchange for cut-rate financing and other incentives.

GM said it would roll out a "Red Tag" sale with lower vehicle prices and cash-back offers starting yesterday.

Toyota, which has overtaken GM as the global auto sales leader, extended a zero-per cent financing offer it had launched in October and backed by a high-profile ad campaign aimed at capitalising on the relative strength of its financing arm.

Nissan launched its own zero per cent offer for this month and next, saying the financing deal would help its own results move higher from October levels.

Jesse Toprak, an analyst with Edmunds.com, said the US market could steady over the remainder of 2008 but said it would take until 2010 for a real recovery.

"A lot of consumers are now waiting for the dust to settle and instead of making big ticket item purchases like a car, they are waiting for more certainty in the marketplace and some signs of hope for a recovery," he said.

The US sales decline hit everything from budget-minded brands to the most expensive luxury nameplates.

Sales at the mass market Hyundai Motor Co. were down 31 per cent while its affiliate Kia fell 39 per cent. At the high end, sales for Porsche sank 50 per cent, while Lamborghini and Bentley posted declines of over 60 per cent.

Citing an "unprecedented credit crunch", GM's North American sales chief Mark LaNeve said cutbacks on leasing and consumer financing at GM's affiliated financing company GMAC were responsible for about half of GM's monthly sales drop.

"It was like someone turned off the lights in the month of October," Mr LaNeve said. GM had sought some $10 billion in government aid to support the merger, a request the US Treasury Department rebuffed last week.

A trade group representing US auto parts suppliers on Monday urged the Bush administration to create a new loan guarantee program for the industry, adding to the chorus of industry backers calling for urgent government aid. Chrysler sales chief Jim Press said he expected that it could take another year and a half before automakers started to see substantial sales gains, but held out hope that October would represent the low-point of the downturn.