U.S. auto sales should recover a bit next year but will remain at depression levels through 2010 until housing prices and job cuts stabilize, the CEO of the nation's largest auto dealer chain said Monday.
AutoNation CEO Mike Jackson said in an interview that tight credit is holding down sales this year, but they will hit bottom in 2009 and start to increase next year, rising to around 11 million cars and trucks. Sales this year are running at an annual rate of around 10 million vehicles.
"We still have more demand than credit," Jackson said after speaking to the Original Equipment Suppliers Association meeting in Detroit. "We see the credit environment ever slowly, gradually improving."
Auto sales, he said, won't return to normal levels until job losses and housing prices begin to stabilize. He predicted improvement in 2011 and 2012, and a return to more normal sales after that.
Earlier this decade U.S. auto sales exceeded 16 million vehicles a year, although industry analysts caution that those numbers were artificial because automakers were producing more vehicles than the market would buy.
Jackson said banks have not recovered from last year's Wall Street meltdown and the collapse of the auto loan resale market. Before the fall of the Lehman Brothers investment bank in September of 2008, banks frequently bundled auto loans and sold them as securities to investors.
But since many of those loans went into default and investors lost money, the market has dried up for the securities and banks have to wait for people to pay off loans to get more money to loan to others, Jackson said.
As a result, he said, many banks have kept credit standards extremely high for car loans, costing the industry sales despite government money designed to ease the credit crunch.
"They simply don't have the money to lend. So, of course, they make the standards unreasonably tough and unreasonably difficult, because they just want to say no. They don't want to say yes," Jackson said.
The Richmond, Va.-based AutoNation, Jackson said, continues to look for opportunities to buy Chrysler dealers after seeing the company unveil its five-year business plan last week.
He said Chrysler had the biggest challenge and was in the riskiest situation among Detroit automakers.
But he said even if Chrysler can't double its sales as predicted in the plan, it still will survive under leadership of Fiat SpA CEO Sergio Marchionne.
"Even if things are much worse than what they're forecasting, they'll still make it," Jackson said. "They've stemmed the bleeding and they have a good cash position. They'll make it through the turmoil, and that's what we really care about."
In presenting the company's business plan last week, Marchionne said Chrysler had $5.7 billion in cash at the end of September, up $1.7 billion since it exited bankruptcy protection this June. As recently as December, though, the automaker was practically out of cash.
But Marchionne said its operations broke even in September because of savings from job cuts and factory closings.