US Auto Sales Plummet to Near 27-Year Low

General Motors reported a 49 percent drop in January sales on Tuesday, a steeper-than-expected plunge that came as overall U.S. auto sales tumbled to their lowest level since 1982.

GM cut its first-quarter production plan and rolled out a new round of discounting in response to the sales decline, which was the largest sales drop for any of the major automakers. Shares of GM dropped more than 4 percent.

GM, which has been struggling to restructure under the terms of a $13.4 billion federal bailout, said it estimated that overall U.S. auto sales for the month of January fell to near 9.8 million units on an annualized basis.

That industrywide sales decline allowed China to surpass the United States as the world's largest auto market for the first time on a monthly basis in January, GM said.

GM said its own retail sales through U.S. showrooms were off 38 percent, but sales to fleet operators, including car rental agencies, dropped by 80 percent.

The automaker cut its first-quarter North American production plan to 380,000 vehicles, down from a forecast for 420,000 units of production offered a month earlier.

GM also said it would offer zero-percent financing and cash rebates on slower-selling models in February. The automaker has suffered as credit tightened for its former captive finance arm, GMAC.

Ford autoworkers.

Ford Motor posted a 40 percent drop in January sales in the United States, the sharpest decline for the No. 2 U.S. automaker in 10 months of double-digit sales declines in the world's largest market for new cars and trucks.

Toyota Motor, the world's largest automaker, was hit with a 34 percent sales decline, a drop that underscores how the U.S. recession has tripped up even the industry's strongest players.

Sales for Nissan Motor were off almost 30 percent.

The results from Toyota , Ford and Nissan on Tuesday were among the first from major automakers for a month expected to show overall sales near 27-year lows, extending a stretch of 15 months of consecutive auto sales declines.

Chrysler said it expected overall U.S. auto sales for January to drop by as much as 35 percent after a sharp decline in sales to car rental agencies.

The expected deep decline in sales comes despite more aggressive discounting by all of the automakers, including cut-rate financing, employee pricing and cash-back rebates.

• Slideshow: Detroit Auto Show Eye Candy

Industry-tracking service Edmunds.com estimated that industry spending on such incentives rose almost 13 percent in January from a year earlier to more than $2,700 on average.

European automakers also reported double-digit sales drops for January: Mercedes-Benz maker Daimler AG and Porsche down 36 percent, and Volkswagen off 12 percent.

Industry-wide U.S. auto sales for January represent one of the first indicators of consumer demand and account for as much as a fifth of retail sales. The downbeat sales reports are expected to add weight to the view that the battered sector will be a further drag on U.S. output in the current quarter.

U.S. auto sales fell 18 percent in 2008 to about 13.2 million vehicles, battered by a spreading credit crunch, plummeting consumer confidence and a deepening recession.

Lowest Sales Rate Since Early 1980s

Sales for 2009 are expected to drop to near 10.5 million vehicles, the lowest level since 1982.

But even that comparison understates the depth of the downturn since the U.S. population has increased about a third since the early 1980s.

Ford's sales decline was worse than most analysts had expected. Shares of the automaker initially slipped as much as 3.7 percent but were down only 3 cents or 1.6 percent at $1.85 in afternoon trading on the New York Stock Exchange.

S&P said in a note for clients that further such sales declines for Ford could make it hard for the automaker to avoid taking government loans to survive. Ford's rivals General Motors and Chrysler are reorganizing under the terms of a $17.4 billion federal bailout.

Ford's belief that it can survive the downturn on its own hinges on its view that the U.S. market will improve in the second half of this year as an expected fiscal stimulus package takes hold and consumer confidence recovers.

CONTINUED : 'Stop Falling Before You Can Start Rising'

---

1 | 2 | Next >