Transcripts

Rising Gas Prices & The Economy Are Stalling Car Sales

SUSIE GHARIB: Sky high gas prices and a weak economy combined to tank sales at the nation's big auto makers last month. March sales fell 19 percent at General Motors, but it left its second quarter production forecast unchanged. GM says it's seeing early signs the U.S. economy could post a recovery in the second half of the year. Ford plunged 14 percent. The auto maker believes sales will bottom out in the second quarter. Even sales at Toyota dropped last month, falling over 10 percent on a big pullback in its truck division. Sales at privately-held Chrysler tumbled over 19 percent.

Well, the nation's auto makers usually count on spring and summer to heat up car sales, but that might not happen this year. As Diane Eastabrook reports, a troubled economy and high gasoline prices are curbing buyer enthusiasm.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The calendar says it's spring, but at many Chicago area auto dealerships, it feels more like winter outside and inside showrooms. Spring typically brings out eager new car buyers, but at Arlington Heights Ford, General Manager Tony Guido is seeing more skeptical buyers.

TONY GUIDO, GENERAL MGR., ARLINGTON HEIGHTS FORD: People are walking in here looking for a new Taurus. They're looking for a new F-150 or a Ford Mustang. We'll be looking at that one- or two-year-old vehicle, possibly a three-year-old vehicle, because you can still certify it. You get an extended warranty with the vehicle, special financing and in most cases, that vehicle can be thousands less.

EASTABROOK: Analysts say a credit crunch, stagnant housing market, a sluggish economy and high gasoline prices could make 2008 the worst year in a decade for U.S. auto sales. Global Insight predicts U.S. vehicles sales could dip below 15 million units this year, following consecutive sales declines over the last few years. While rebates and cut-rate financing have revived flagging sales in the past, Global Insight auto analyst Rebecca Lindland doesn't think they'll be as effective this time because many consumers are cash strapped for down payments.

REBECCA LINDLAND, AUTO ANALYST, GLOBAL INSIGHT: You've got a consumer that is worried about how are they going to make their house payment, how are they going to make their utility bill payment, how are they going to make their college kid's tuition payment, because they don't have their home equity to tap into anymore.

EASTABROOK: Still, some dealers, like Kurt Schiele at Elmhurst Auto Group, think high gas prices could actually help sales of some vehicles. He says some of the customers coming into his showroom are interested in buying hybrids or other more fuel efficient vehicles.

KURT SCHIELE, V.P., ELMHURST AUTO GROUP: Say they were looking at that large maybe SUV, maybe they're looking at a smaller SUV. Maybe they'll trade down to a sedan. You know, we've had instances where people will trade in their full-size SUV in on a Toyota Yaris or a Toyota Prius.

EASTABROOK: Analysts don't think the head winds facing the auto industry will blow the U.S. companies off course in their recovery efforts, but they do think it could take those companies a bit longer than expected to turn a profitable. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Arlington Heights, Illinois.