Jittery auto dealers are cutting back orders for new cars and trucks amid growing concerns that 2008 vehicle sales could be even more anemic than this year’s.
The U.S. auto industry is on track to have its slowest year since 1998, hit by eroding consumer confidence and one of the worst housing slumps in decades.
To avoid costly pileups of unsold vehicles, dealers say they’re preparing to pare back inventories, which could force automakers to cut production even further next year. A Wachovia Capital Markets survey of major auto dealers found that more than one-third plan to reduce 2008 orders, up from about 20 percent just a few months ago.
“I’m certainly being more cautious,” said Carl Galeana, president of the Galeana Automotive Group, with dealerships in Michigan, Florida and South Carolina. “I’m reeling in what I’m stocking and am looking not to sell at the same rate that I sold at this year.”
There is, however, a bright spot amid the gloomy outlook.
Detroit’s automakers appear to have put an end to the old practice of pushing dealers to take cars and trucks they can’t sell. At the same time, more than a year of deep production cuts by domestic carmakers mean the companies are leaner and better prepared to weather slower demand.
“They’re changing how they’re selling cars to dealers,” Galeana said. “They’re not going to keep pushing hundreds of vehicles on us.”
U.S. car and truck sales are on track to end 2007 at a nine-year low of about 16 million vehicles, down from 16.6 million in 2006 and 17 million in 2005.
General Motors Corp. officials expect a flat market next year, while Nissan Motor Co. chief executive Carlos Ghosn said in October that the market would be flat at best, ranging between 15.5 million and 16 million vehicles.
Dealers across the country will place their orders for January and February in the next week or so. Rising interest rates are making them even more cautious about how many vehicles they will stock, since dealers pay interest on unsold vehicles.
“If we don’t see some sort of boost, our orders will be reflective of that slowdown,” said Bob Thibodeau, a Ford dealer. “We certainly are seeing a little bit of an increase in our stocking levels. Sales are just not what we hoped.”
