2008 sure to be 'a crummy year' for automakers

DETROIT -- In a year when much seems uncertain, including whether the USA will have a recession, there's no question that 2008 is going to be tough for the auto industry.

It's going to be tough on sales, which could hit a decade low. It'll be tough on production, which hasn't been this weak since the recession of 1992.

And Paul McCarthy, a director at PricewaterhouseCoopers' Detroit group, thinks it'll be particularly tough on domestic automakers, because in tough times buyers are likely to choose brands they perceive as having the best reputations for quality — typically, Asian brands.

"It's going to be a crummy year," says Michael Robinet, vice president of global vehicle forecasts for CSM Worldwide. The only question, he says, is "how crummy it's going to be."

Light vehicle sales — almost anything smaller than a commercial delivery van — hit 16.1 million in 2007. Sales have been creeping down since a high of 17.4 million in 2000, and are expected to be somewhere in the mid-15-million range this year.

Part of the decline can be blamed on the economy. Consumers, shaken by falling home values and the credit crunch, aren't feeling confident enough to add another large payment into their monthly bills.

Add gasoline prices, which have been around $3 a gallon the past year, and consumers are feeling less than rosy about buying new cars.

But the other factor affecting sales is the domestic automakers' relatively new strategy to slash production when sales drop, rather than to keep producing and prop up sales by pumping in rebates and low-interest loans.

And this time, automakers have decided it's better to forgo sales than to lure huge numbers of buyers with rebates and special deals, analysts say.