News

Canada plunged into the grip of a full-blown automotive recession last month as vehicle sales tumbled 21 per cent, led by a slump among auto makers that had been performing well.

Massive declines at Honda Canada Inc. and Toyota Canada Inc. helped push December sales to their lowest level since 1996, the overall total for 2008 to a year-over-year decline and the Canadian market into territory the United States has been experiencing for six months.

With that six-month head start, U.S. sales collapsed last year to their lowest point since 1992, with December coming in at about the same sales rates as November and October.

The U.S. slump has already led to major cuts in auto production in Canada - only a handful of assembly plants in all of North America are operating this week, for example - but until last month, sales in Canada had bucked the big slide hammering the U.S. market.

Now, however, "we've started into an automotive recession," said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ont. "When we'll come out of it, nobody knows."

Honda's sales plummeted 41 per cent in December and Toyota's 35 per cent. Even with the declines, however, both reported record annual sales and Toyota jumped into the No. 2 spot in Canada for the first time on an annual basis. Offshore-based auto makers also grabbed more than 50 per cent of full-year sales in Canada, the first time they have accomplished that feat.

Toyota pushed Chrysler Canada Inc. out of second place for the year.

Chrysler's sales tumbled 36 per cent in December.

Ford Motor Co. of Canada Ltd. and General Motors of Canada Ltd. both outperformed their Japan-based rivals and the market last month with drops of 5 and 19 per cent respectively.

"There was carnage from one end of the industry to the other," Mr. DesRosiers said.

Consumer confidence, the economic slump and the credit crisis all bear part of the blame for the December collapse, he noted.

Several dealers said tightening of credit terms for buyers is starting to have an impact on sales.

There were some bright spots in Canada, including a record year for Mercedes-Benz Canada Inc. and Subaru Canada Inc., and sales of its Mini vehicles helped BMW Canada Inc. to record its 18th-consecutive annual sales increase.

Nissan Canada Inc. also broke its yearly sales record.

The U.S. sales divisions of Honda Motor Co. Ltd. and Toyota Motor Corp. reported plunges of more than 30 per cent in December sales in the United States, although Chrysler LLC did even worse with a 53-per-cent collapse from year-earlier levels.

There's no short-term fix on the horizon, U.S. industry officials warned, although they expressed some optimism about an improvement in pickup truck sales as gasoline prices fell below $2 (U.S.) a gallon.

"We expect the first few months of 2009 to feel much like the last three months of 2008," Emily Kolinski Morris, Ford's senior economist, told reporters and analysts on a conference call.

Some U.S. dealers are offering two vehicles for the price of one, resorting to the hucksterism seen in late-night television ads by bargain-basement retailers.

Hyundai Motor Co. of South Korea is trying a novel approach by offering to let U.S. buyers return vehicles for up to a year if they lose their jobs and can't meet monthly payments.

In Canada, Toyota is using more traditional approaches, such as no payments for the first 90 days on new models, as well as gas cards for Canadian-made models.