In 2008, A Train Wreck For Car Sales (GM)(F)

The final month of 2007 looks pretty bad for car sales, and going into next year, things could get worse.

According to MSNBC "December sales are expected to fall around 4 percent, which would bring the full-year total for U.S. auto sales to 16.1 million vehicles, the lowest volume since 1998."

Some Wall St. analysts see Ford’s (F) sales falling as much as 12% in December. GM (GM) could be down more, due to a drop in sales to rental fleets. It is the kind of "bad news is good news" that Detroit passes around these days. We don’t make money selling to rental fleets, so that business is being cut. What is not mentioned in the same breath is that no one else stepped up to buy those cars.

In a recent interview Jerry York, an adviser to billionaire investor Kirk Kerkorian; financier Wilbur Ross; and Thomas Stallkamp, a former Chrysler president said that 2008 vehicle sales in the US could fall as low as 14.5 million. That could suck well over $35 billion in revenue out of the market next year.

The car experts at Edmunds believe that there are other trends which will undermine new car sales and profits next year. Incentives are expected to stay high. On US models, this could average about $3,000.

One of the most important trends which could undermine American new car sales is the moved to certified pre-owned vehicles, the high end of the used car market. Edmunds writes "certified pre-owned vehicle sales will rise as consumers will look to spend less and seek a greater sense of security in their next used vehicle purchase."

Ford and GM are trading near 20 year lows. It is hard to imagine, but that could get worse in 2008.

Douglas A. McIntyre