WASHINGTON – Walloped by the recession, automakers' U.S. sales are plummeting as hard-to-get credit, job losses and other stresses make many Americans wary of taking on big-ticket financial commitments.
Auto sales for November, released Tuesday, are expected to show a drop of 36 percent from a year ago to a seasonally adjusted annualized rate of 10.2 million vehicles, according to Joseph Amaturo, analyst at Buckingham Research. Those sales figures would include the Big Three Detroit car makers as well as foreign companies that sell vehicles in this country.
Later Tuesday, General Motors Corp., Ford Motor Co. and Chrysler LLC will provide a skeptical Congress with details about their long-term viability plans. The U.S. auto companies are desperately trying to secure $25 billion in fresh government loans to help them survive the economic carnage. They insist that bankruptcy is not an option, even as companies burn through cash and bleed jobs.
The auto industry's plight comes under an intense spotlight just one day after the United States got some grim news of its own: The economy has been stuck in a recession since December 2007.
Most Americans sorely knew it already, but it became official on Monday with the determination from the National Bureau of Economic Research.
With the decision by the NBER, a group of academics, the United States has fallen into two recessions during President George W. Bush's eight years in office. The first one started in March 2001 and ended in November of that year.
The economy jolted into reverse in the final three months of last year. After a short spring rebound, it contracted again in the summer. Economists say it is still shrinking and will continue to do so through at least the first quarter of next year.
Unlike some past recessions, consumers are bearing the brunt of this one. Clobbered by vanishing jobs, the credit crunch and hits to their wealth from sinking home values and plunging portfolio investments, consumers have cut back sharply on their spending, which accounts for two-thirds of all economic activity.
Watching customers' appetites wane, employers have throttled back on hiring. The unemployment rate in October zoomed to 6.5 percent, a 14-year high. So far this year, 1.2 million positions have disappeared. The jobless rate is likely to climb to 8 percent or higher next year.
Against that backdrop, many economists believe the current recession will be the worst since the 1981-82 downturn.
With the economic pain likely to stretch well into 2009, Federal Reserve Chairman Ben Bernanke said Monday he stands ready to lower interest rates yet again and to explore other rescue or revival measures.
The Fed's key interest rate now stands at 1 percent, a level seen only once before in the past half-century, and many economists predict Bernanke and his colleagues will drop the rate again at their next meeting on Dec. 15-16.
The Fed can lower its key rate only so far — to zero — and it's getting ever closer. Given that constraint, Bernanke said there are other ways to bolster economic activity.
For instance, the Fed could buy longer-term Treasury or agency securities on the open market in substantial quantities, he said. This might lower rates on these securities, "thus helping to spur aggregate demand," Bernanke said.
Rushing in reinforcements, Treasury Secretary Henry Paulson, who along with Bernanke has been leading the government's efforts to stem the worst financial crisis since the 1930s, pledged to take all the steps he can in the waning days of the Bush administration to provide relief. Specifically, Paulson is eyeing more ways to tap into a $700 billion financial bailout pool.
On Capitol Hill, House Speaker Nancy Pelosi vowed to have a massive economic stimulus package ready on Inauguration Day, Jan. 20, for President-elect Barack Obama's signature.
That measure — which could total a whopping $500 billion — would bankroll big public works projects to generate jobs, provide aid to states to help pay for health care for the poor and provide money toward renewable energy development. Crafting such a colossal recovery package would mark a Herculean feat: Congress convenes Jan. 6, giving lawmakers just two weeks to complete their work if it is to be signed on Jan. 20.
Bush, in an interview with ABC television's "World News," expressed remorse about lost jobs, shrinking retirement accounts and other damage wrought by the financial crisis. "I'm sorry it's happening, of course," he said.
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