Can the disgrace that is the U.S. auto industry get any worse? Apparently, yes. January figures show that not only did General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler suffer from horrific drops in sales, but now China has surpassed the U.S.
Chrysler led the way down with a 55% decline in January sales, followed by GM, which saw sales fall by 49%, and Ford bringing up the rear with only a 40% drop-off. In 2008 the Detroit Three combined to sell 13.2 million, a poor performance in itself, but now with January's numbers out, according to Autodata Corp., we're looking at a run rate of 9.6 million cars for 2009. China, however, sold enough vehicles to generate a run rate of 10.7 million for the year, passing the U.S. for the first time.
Sure there are a few caveats, such as China including sales of heavy commercial vehicles and buses where the U.S. carmakers do not, but the numbers are worrisome nonetheless.
Back when GM and Chrysler got the OK for $34 billion in loan guarantees, it was based on the premise that they would have a solid plan to return to profitability in place come March 31. While the CEOs assured Congress it was achievable, it was predicated on a domestic car market that would support 12.5 million to 13 million in vehicle sales, but would need more like 16 million car sales to enjoy "healthy profits." In fact, GM's baseline look for 2009 was for 12 million sales with a worst-case scenario of 10.5 million sold. It doesn't seem feasible that the carmakers will achieve even these dour predictions; it's more likely that they're going to need much greater infusions of cash if they're going to survive.
The tab for the whole industry is poised to mushroom. Along with the automakers, car rental agencies like Avis (NYSE:CAR) and Hertz (NYSE:HTZ) are pushing for a bailout of their own and now the auto parts supply industry wants one, too. On Monday, the Motor & Equipment Manufacturers Association -- representing Lear (NYSE:LEA) and TRW Automotive, among others -- asked for $25.5 billion in aid and guarantees.
Detroit is no longer interested in trying to beat Japanese carmakers. When Toyota (NYSE:TM) took the crown of biggest car seller from GM, I suggested it didn't matter when you're trying to simply keep your head above water. Smaller and solvent is preferable to biggest but bankrupt. Nor does the latest ignominy of China surpassing the U.S., fudged numbers or not, count for much. The future for Detroit lies in being able to build fuel-efficient cars that meet the needs of consumers.
Hopefully it will still be allowed to finish the race. While GM is hoping its plug-in Chevy Volt will be ready for next year, Ford won't have a plug-in model until 2012, having just inked a deal with Johnson Controls (NYSE:JCI) to supply lithium-ion batteries for the vehicle. It's just too bad that Detroit is sprinting now toward the alt-fuel goal line when it has expended all its energy already. Not making it to the finish line would just be adding insult to injury.
