The Ostrich Farm: Detroit's Trouble Gets Worse (F)(GM)(TM)

When the most powerful company in an industry says it won’t makes it numbers, the ripples are bound to look like storm-driven waves. Toyota (TM), for so long certain that it would do well in 2008, is having a change of heart. According to Reuters, the company is "unlikely to meet its global sales target of 9.85 million units this year due to slowing sales in major markets amid the yen’s strengthening." It blames markets in the US, Europe, and Japan.

Auto research company JD Power has revised its estimates of US domestic unit sales for 2008 down from 15.5 million to 14.95 million. There were about 16.1 vehicles sold in America in 2007.If sales hit the lower end of industry estimates, they could fall to 14.5 million. That would suck about $40 billion in revenue out of the market this year.

US car executives have their heads in the sand. While they are working on cutting costs, they still think they can make top-line numbers which are now almost certainly out of reach. According to The Wall Street Journal "GM expects total U.S. vehicle sales, including heavy trucks, in the low 16 million-unit range, meaning light-vehicle sales of roughly 15.7 million."

With two poor months of sales already in the books, a deepening recession, and high gas prices, a good year is out of the question.

The statements from auto executives that they might still make 2008 and 2009 numbers are a reminder that the industry has lived with blinders on for decades. The "best case" is usually the most likely case in their minds.

Not this year.

Douglas A. McIntrye