Getting set for a SOFT MARKETState of the Industry:North America

Salvador Dali is famous for his surrealistic paintings of wilting clocks and melting globes, and unfortunately, the forecast for car and truck sales in North America next year looks as soft and bizarre as anything Dali could have dreamed up.

The market was volatile prior to Sept. 11. Afterwards it became utterly surreal. In the days immediately following the terrorist attacks in New York and Washington, DC, vehicle sales dropped to almost nothing. Then, thanks to a bold marketing campaign advertising 0% interest launched in the U.S. by General Motors Corp. — and matched by most other major U.S. manufacturers — vehicle sales soared to a new monthly record in October, hitting a seasonally adjusted annual rate (SAAR) of 21.3 million units.

For those of you who don't follow sales statistics closely, a 21.3 million-unit SAAR means that's how many vehicles would be sold for the year if every month has sales like October. And that would be 4 million units higher than the best sales year in history.

What this incentive-fueled buying binge portends for sales and profits in the coming year has the industry's smartest prognosticators throwing up their hands in frustration. The most pessimistic independent forecasts say sales could drop as low as 14 million units next year, while others predict a strong second half could push sales over 16 million. In mid-November automakers themselves were expecting 2001 sales to end up around 16.8 million, making it the third best on record. The best guesses they offer for 2002 range from Ford Motor Co.'s “15 millionish” to Toyota Motor Corp.'s 15.8 million. The following pages give a detailed look at how everyone is trying to sort out what promises to be a very strange year.