Auto sales pressure US for aid

Bloomberg

Industry sales plummeted 41 percent last month to a 9.1 million vehicle annual rate, the lowest since December 1981, according to Autodata. GM, surviving with the aid of government loans, reported a 53 percent drop.

At that level, nearly every automaker is struggling and GM and Chrysler, which are requesting $21.6 billion in additional loans from the U.S. government, said they likely will need it all. Additional government aid to keep the automakers out of bankruptcy is making less sense, because it has become difficult to project an end to the sales declines, said Stephen Spivey, an automotive analyst at Frost & Sullivan in San Antonio.

"If it stays contracted at this rate for a significant period of time, the bridge loans are being recalled and they are going into bankruptcy," Spivey said Tuesday in an interview after the sales results.

Below expectations

President Barack Obama’s automotive task force has been meeting with automakers, union officials and auto-parts makers about how to address the collapsing industry. The government has committed $17.4 billion to GM and Chrysler. Both firms are working on a March 31 deadline to accomplish a restructuring plan that includes concessions from labor and lenders, or the loans can be called by the government.

The sales rate in February, below the 9.5 million average of 27 analysts’ and economists’ estimates compiled by Bloomberg, "implies the maximum amount of government aid - if not more - will be necessary" for GM and Chrysler, said Rebecca Lindland, an analyst at IHS Global Insight in Lexington, Massachusetts.

"These are unsustainable levels which are causing almost every major manufacturer across the world to look for government aid," Michael DiGiovanni, GM’s chief sales analyst, said Tuesday. He said February is the low point in the market.

The 40 percent February U.S. decline for Toyota, the world’s largest automaker, was its biggest ever. Toyota, forecasting its first loss in 59 years, may ask Japan’s government for 200 billion yen ($2 billion) in loans.