By Ben Foldy and Mike Colias
The worsening coronavirus outbreak is threatening to bring the
U.S. auto industry's near decade-long run of robust sales and
steady profits to a jarring halt.
With many Americans staying at home, dealers say new-car sales
are tanking and showrooms are quiet. Several analysts have cut
their sales forecasts for 2020, upending predictions for another
solid year in the U.S. car business. Car companies are rolling out
promotions to soothe rattled customers, including interest-free
loans and delayed monthly payments.
The U.S. car market, for years the world's most lucrative, had
been a haven for global auto makers ever since the coronavirus
outbreak began to spread. Sales in China cratered as factories shut
down and dealerships closed. In Europe, auto makers have been
forced to cut production as Italy went on lockdown and the virus
spread to other major markets.
Now, the industry's concerns have shifted from fretting about
factory disruptions to bigger worries about whether people will buy
cars as much of society shuts down.
"It feels like there is a dark cloud over the dealership," said
Andre Woods, a 40-year-old sales associate at Village Ford in
Dearborn, Mich. "It's got me unnerved, and I don't shake
easily."
For many U.S. dealers, the recent drop off-in buyer traffic was
sharp and sudden, just as the industry was gearing up for the busy
spring-selling season.
Stores in most areas had seen little virus-related slowdown
before last week, when schools began closing and states and the
federal government declared emergencies, said Rhett Ricart, an Ohio
dealer and chairman of the National Automobile Dealers
Association.
"That changed everything," Mr. Ricart said. On a conference call
with the heads of dozens of state dealership groups Monday, those
in states with tighter restrictions on gatherings reported sales or
showroom traffic down 25% to 50% in the past few days, he said.
George Waikem II, general manager at Waikem Ford in Ohio, said
the dealership had a solid sales weekend, but store traffic
evaporated on Monday, a day after the state's governor ordered bars
and restaurants closed to limit the virus' spread. Of the 12 sales
appointments scheduled for the day, all but one canceled, he
said.
The store already has scaled back some, moving its carwash
operation to a skeleton crew and considering other measures if
sales continue to slow, he said. His outlook for the week:
"Probably a ghost town."
Analysts are warning of the first significant drop in U.S.
vehicle sales since 2009, potentially spelling an end to an
unprecedented streak of good times for an industry accustomed to
boom-and-bust cycles. While U.S. car factories for the most part
continue to run, auto makers could be forced to cut production if
sales continue to fall or the virus spreads to workers in the
plants, they say.
The United Auto Workers and the Detroit car companies reached
agreements late Tuesday on coronavirus-mitigation efforts,
including partial shutdowns of U.S. factories to help limit worker
contact and create more time for cleaning.
José Muñoz, chief executive of Hyundai's North American
division, said he expects the auto maker's U.S. sales to drop in
March by 15% to 20% over the same month last year and then further
slide in April by as much as 50%.
"I see the situation getting worse for the next few weeks," Mr.
Muñoz said, adding that he did not expect a slow recovery until
summer at the earliest.
RBC Capital Markets this week said auto sales could fall to 13.5
million vehicles this year, which would mark a 20% decline from
last year and the lowest level since 2010. The bank also doesn't
see a quick snapback in car sales.
Matthew Welch, who owns Auburn Volkswagen in the Seattle area,
the site of the country's worst outbreak so far, said sales are
down around 30%. He worries what would happen if his store were
forced to temporarily close.
"If we have to pay people to not come in, financially we can't
do that for long," he said. For now, Volkswagen AG is trying to
soften the blow by offering salespeople another $100 for each
vehicle they sell on commission, he said.
Some dealerships, including Auburn Volkswagen, are trying to
lure in wary buyers by putting a bigger emphasis on their
online-sales services, including those that allow shoppers to skip
the showroom and take delivery of their new vehicle at home.
While such services have been slow to catch on -- the
overwhelming majority of car buyers still prefer to make the
purchase in person -- the virus outbreak has sparked more interest
lately, said Rick Case, who heads a chain of 16 auto dealerships in
Ohio, Florida and Georgia. "People are afraid to go out," Mr. Case
said.
Car companies also are scrambling to offer ways to quell the
financial uncertainty for customers. General Motors Co. is offering
buyers with good credit no-interest loans stretched over seven
years, and allowing them to delay payments for four months. Ford
Motor Co. on Monday said its in-house lender would allow customers
experiencing virus-related disruptions to delay payments in some
situations.
Hyundai Motor Co. has dusted off a version of a deal it first
rolled out in the throes of the recession in the late 2000s: The
company will cover six months of payments for any new-car buyer who
loses their job after their purchase.
Before the virus hit, analysts were predicting U.S. vehicle
sales would start to cool this year, after topping out at 17
million in 2019 for a record fifth straight year.
Any coronavirus-related hit to the U.S. car market would come at
a bad time for Detroit. GM had hopes for a strong start to 2020
after a 40-day strike at its U.S. factories last fall drained $3.6
billion in profit. At Ford, Chief Executive Jim Hackett has assured
uneasy investors that his turnaround plan would bear fruit this
year following several disappointing quarters.
Write to Ben Foldy at Ben.Foldy@wsj.com and Mike Colias at
Mike.Colias@wsj.com
(END) Dow Jones Newswires
March 18, 2020 08:14 ET (12:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
General Motors (NYSE:GM)
Historical Stock Chart
From Mar 2024 to Apr 2024
General Motors (NYSE:GM)
Historical Stock Chart
From Apr 2023 to Apr 2024