Detroit Auto Show: U.S. Auto Sales Even Worse Than They Appear, O'Neill of J.D. Power Says

(MoneyWatch)  DETROIT -- U.S. auto sales are so low, one or two car companies are "walking dead," said Finbarr O'Neill, president of J.D. Power and Associates.

He avoided naming anyone, but of the Detroit Big 3, Chrysler LLC is obviously the most vulnerable. In the last six months of increasingly pessimistic, doom-and-gloom forecasts, O'Neill delivered one of the gloomiest yet, at an industry conference here.

What made O'Neill's forecast stand out was that he broke out fleet sales from total auto sales. Fleet sales to government and commercial buyers are generally less-profitable than retail sales to individual customers; fleet sales to daily rental fleets may be downright unprofitable. Nevertheless U.S. auto sales figures typically include fleet sales. Without them, sales look even worse.

Looking strictly at retail sales, O'Neill said 2008 sales fell to only 10.6 million retail units, down about 2.2 million from 12.8 million in 2007. "That's a couple of car companies. A couple of car companies didn't go away, so that means somebody is the walking dead," he said.

O'Neill said his firm expects 2009 retail auto sales to fall to only 9.1 million units. Including fleet sales, U.S. auto sales fell 18 percent in 2008, to about 13.2 million. O'Neill addressed the Society of Automotive Analysts, at their annual Outlook Conference, held in conjunction with the press preview of the Detroit auto show.

He said that the automakers that are best-positioned to survive have successful new vehicle launches; leadership in new-product development/technology; flexibility in manufacturing capacity and vehicle platforms; a global footprint; enough cash to weather the storm; and a diverse product portfolio.

It's debatable whether Chrysler has any of these things, especially the last three. Chrysler is almost entirely dependent on the North American auto market; it nearly ran out of cash in January, except for a government bailout; and it is more dependent on trucks than GM or Ford.

"It's sobering," O'Neill said. The closest thing to optimism he could manage was the opinion that the U.S. auto industry is now at or close to the bottom of the sales dowturn, prior to a slow and weak recovery in 2010 and 2011.