General Motors Corp.'s move to cut production of full-size pickup trucks is underscoring fears that the auto industry is headed for a longer and more painful downturn in the U.S. than many had expected.
A longer downturn, industry observers say, could threaten the turnaround plans of GM and the two other U.S.-based auto makers.
U.S. auto sales declined sharply in June and July as falling home values and credit worries damped consumer interest. Early reports from dealers and market researchers have shown slight or no improvement this month compared with what was regarded as an unusually weak August a year ago. The sales weakness has hit both Detroit's Big Three and Japan-based auto makers like Toyota Motor Corp., which saw U.S. sales drop last month after a string of healthy increases.
"It's pretty scary. The consumer has pulled back," said Michael Jackson, chief executive of AutoNation Inc., the country's largest chain of auto dealerships. Retail auto sales, or sales to individual consumers, are "a disaster," he said.
This months retail sales were fair, but not great. Consumer spending only increased 1.5% in the latest GDP report. And consumer sentiment dropped in July thanks to stock market turmoil.
Now we have executives at large, national car sales chains saying that sales to individual customers are a "disaster".
Consumer spending is not looking good right now. And that does not bode well for the economy.