Confidence In Auto Makers Up After Bailout

Consumer Confidence In Auto Industry Gets A Boost
Judy Schumacher Tilton talks with customers at her car dealership in Northern New Jersey.
CBS

The latest numbers on new car sales come out Monday, and they're expected to confirm a dismal December. Analysts are estimating a 39 percent decline over 2007, but not all the news is gloomy, reports CBS News correspondent Michelle Miller.

Marc Yaniero hadn't thought seriously about trading in his old car, until now. He's one of a growing number of car owners whose confidence in American auto makers has gotten a boost in recent weeks.

"I wouldn't be standing here," Yaniero says. "I wouldn't be trading-in a paid-off BMW for a Camero if I didn't feel confident in GM."

He's confident because the Treasury Department infused $17.4 billion into General Motors last week, and pledged another $5 billion to its lending arm, GMAC. Dealers hope the rescue funds will free up credit to potential car buyers, Miller reports.

Already GMAC has lowered its minimum credit score from 700 to 621, making an estimated 49 million more Americans eligible for loans. And on top of that, dealers are offering extra incentives to those who are now eligible for financing.

"The interest rate has been lowered," says Barbara Brown. "That makes a difference because I might have to do without a car otherwise."

And other incentives, like cash rebates and two-for-one deals, are luring customers back into showrooms.

"I've seen in the past 2-3 days an influx of car traffic and more people out buying," says Judy Schumacher Tilton, who owns a dealership in Northern New Jersey.

Sales at Tilton's dealership, she says, have remained steady.

Elsewhere, vehicle sales declined 37 percent in November, the worst level in more than 26 years, Miller reports. Every major auto-maker reported decreases of more than 30 percent.

But in these tough economic times, auto experts say bargain basement pricing and low interest loans might not be enough to spur big-ticket purchases.

"People don't feel like we've hit rock bottom, and they don't want to take any chances," says Rebecca Lindland, director of IHS Global Insight's automotive group.

When they do, Miller reports, they're buying more cars and fewer trucks. That's an indication that even with lower gas prices, the failing economy may have broken our addiction to gas guzzling models. For the first year since 2000, passenger cars outsold light trucks, minivans and SUVs.