From: Reuters
Published February 29, 2008 07:00 PM

Chrysler sees tough month, year for auto sales

By Jui Chakravorty Das

NEW YORK (Reuters) - Chrysler LLC's February sales are trending below 2007 levels, an early sign of weakness in a year the automaker expects will be marked by a continued downturn, Chrysler Vice Chairman Jim Press said on Friday.

"This year is going to be a pretty severe year," Press told reporters in New York.

Higher gasoline prices combined with a weak housing market and a subprime mortgage crisis have raised concerns that the U.S. economy could tip into recession in 2008 and cause consumers to delay big-ticket purchases such as new vehicles.

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"My feeling is we've been in a sort of a recession longer than we've known," Press said. "This (February) is below trend. We are also starting to see the impact of the tightening of credit affecting more of our customers."

U.S. auto sales fell for a second consecutive year in 2007, dragged down by a slowing economy, a housing market slump and tighter credit markets that pinched less-credit-worthy borrowers.

Many analysts and some industry executives see a risk for a drop down to near 15.5 million vehicles this year, although some automakers like General Motors Corp <GM.N> are still banking on stronger demand in the second half.

Press said forecasts for a second-half recovery in U.S. vehicle sales was a kind of "wishful thinking."

"I don't think there will be much growth. I think there is still more bad news to come," he said. "It will be at least through the first quarter of (2009) that we are going to continue to see a challenging environment from a credit standpoint."

Major automakers are scheduled to release February U.S. auto sales on Monday in data expected to show signs of a deepening slump for the sector.

Press said he expected overall sales at Chrysler in 2008 to be down from a year earlier as the automaker cuts back on low-margin fleet sales. He said the company's retail sales would be "a little bit ahead" of 2007 levels.

Last month, Press said Chrysler wants to cut its fleet sales to no more than 20 percent of total sales.

Press, who was lured from Japanese automaker Toyota Motor Co <7203.T> in 2006, is helping lead a restructuring at Chrysler that includes slashing models and consolidating dealerships.

Chrysler, said Press, does not need to keep all of its current 11 models of sport utility vehicles and was looking at the Jeep Compass and Jeep Patriot as part of the ongoing review of its lineup.

Chrysler, which lost $1.6 billion in 2007, is owned by private equity company Cerberus Capital Management <CBS.UL> which bought an 80-percent stake in the company last year from Daimler AG <DAIGn.DE>.

Press said Cerberus has considered merging Chrysler Financial and GMAC, GM's former financial arm. Cerberus also owns a majority stake in GMAC.

"Potential exists for the future. There would be advantages to be had and issues to be overcome," Press said. "People have considered the possibility. There is no plan right now, as far as I know."

(Additional reporting by Kevin Krolicki in Detroit)

(Reporting by Jui Chakravorty, editing by Tim Dobbyn)

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