Tighter Credit Adds to Auto Industry's Woes

Washington DC October 1, 2008; The AIADA newsletter reported that after enduring a brutal sales slump caused by high gas prices and a faltering economy, the last thing the American auto industry needed was a credit crisis. But with banks tightening up their lending, any hope for a recovery in vehicle sales this year has been dashed.

According to the New York Times, the virtual lockdown on credit is hurting automakers at every level. More consumers cannot get auto loans. Dealers are hard-pressed to secure financing for new inventories.

The auto companies themselves are running short of cash and can hardly afford to borrow more at interest rates as high as 20 percent. It all adds up to an increasingly dismal forecast for the industry.

Vehicle sales fell 11 percent in the first eight months of the year compared with 2007. But September sales, which automakers will report today, are expected to be down as much as 19 percent. "We thought we had hit bottom, but it doesn't look that way," said David Healy, an analyst with Burnham Securities. "Unfortunately, October could be even worse."