Transcripts

All Auto Dealers Are Ailing These Days

SUSIE GHARIB: Those pleas for government aid came as the auto makers reported another month of dismal sales. GM sales plunged 41 percent; at Ford Motor, a drop of 31 percent. Chrysler sales fell 47 percent. Toyota is also sputtering. U.S. sales tumbled 34 percent. As Diane Eastabrook reports, these days, it seems as though no dealers are selling cars.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Not even incentives or falling fuel prices could lure American consumers back into auto showrooms last month. Some dealers say they have enough cars and trucks on their lots to last them anywhere from three to five months. With a credit crunch, a recession and a volatile stock market weighing on consumers, Morningstar analyst David Whiston doesn't see a sales turnaround for the rest of the year.

DAVID WHISTON, AUTO ANALYST, MORNINGSTAR: There is no reason to really expect anything to improve in terms of consumer confidence and the ability to get credit and things like that. So -- and with unemployment accelerating too, no one really wants to make a big-ticket discretionary purchase like a car.

EASTABROOK: Most analysts agree time is running out for the Detroit three as they wait for Congress to decide on a potential bailout. In the third quarter, Ford burned through nearly $8 billion in cash, while General Motors burned through nearly $7 billion. Experts think that cash burn rate will accelerate as sales continue to slide. Whiston says without an immediate cash infusion, GM and Chrysler face certain bankruptcy.

WHISTON: If they don't get any help from the government, I think GM and Chrysler would file for bankruptcy pretty quickly. I think Chrysler would even file before the end of 2008.

EASTABROOK: Industry watchers say the auto makers have few options as they wait for a possible government loan. They believe closing plants would take too long and reducing employee head counts through buyouts would be too costly. Global Insight auto analyst Rebecca Lindland thinks negotiating production and wage cuts with the United Auto Workers could help.

REBECCA LINDLAND, AUTO ANALYST, GLOBAL INSIGHT: They do have to continue to pay the UAW workers 95 percent of their salaries, even if they're not running a plant. So, that is where the UAW comes into play, where they can help, providing some concessions and some relief so that the manufacturers can cut production and not have to continue to pay such a high level of wages.

EASTABROOK: Lindland doesn't think vehicle sales will rebound until consumer confidence improves and she doesn't expect that to happen until late next year. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.