Now for the really bad news: The U.S. economic malaise has spread to other key markets, including Europe, killing hope international demand could help offset deep losses in North America.
That prospect lands heaviest on the U.S.-based automakers General Motors Corp and Ford Motor Co, which have relied in on strength overseas to make up for market share losses and financial straits at home.
The doom and gloom in the U.S. market was reflected in September auto sales, which fell below 1 million for the first time since 1993 amid the severe credit crunch that has rocked U.S. consumer confidence, especially in the last 10 days of the month.
With the ripples from the U.S. credit crisis now putting pressure on the world economy, U.S. automakers may be forced to cut costs in Europe and emerging markets such as Russia and China that are slowing, analysts and industry executives said.
"One of the safe spots for GM and Ford was their ability to make money overseas to help offset some of the problems here at home," said Erich Merkle, an analyst with Crowe Horwath. "As we go through this year and next, they are not going to be able to count on that."
Merkle forecast that U.S. automakers may cut production in overseas markets to align costs with lower demand and may have to scale back growth plans in emerging markets such as Russia.
If European volume falls a further 10 percent with a slowdown in emerging markets, Morgan Stanley would expect most auto companies to lose money and burn cash, analyst Adam Jonas said.
With sales sagging in the United States, Detroit-based automakers have in the past few years relied on overseas markets for profits as they restructure at home.
But GM and Ford executives speaking at the Paris Auto Show warned of tough times ahead in the global market that could force production cuts and job losses.
GM Chief Operating Officer Fritz Henderson spoke of concerns about Western Europe, while Ford Chief Executive Alan Mulally expected no recovery in the global car market until 2010.
Ford also sees emerging signs of consumer credit issues in Europe, which reinforces the view that a potential slowing in auto sales outside the United States presents a risk over the next six-to-twelve months, JP Morgan analyst Himanshu Patel said in a note to clients.
U.S. industrywide auto sales plunged 26 percent in September, dashing any hope that demand had touched bottom in August when automakers reported a sales improvement over July.
Every major automaker posted sales declines in September, including a surprising 32 percent drop for Toyota Motor Corp , its steepest since 1987.
And the adjusted annual rate of sales, a key figure watched by economists, bumped along at a 15-year low.
"Hope that August's sequential recovery was the beginning of a developing bottom in monthly auto sales would now seem misplaced," Patel said.
Auto executives have called the proposed $700 billion financial sector bailout critical to allaying consumer fears and freeing up credit markets. But it remains to be seen how long it would take for the freeze to thaw.
Barclays Capital Plc analyst Shannon O'Callaghan said the credit crunch is likely to be deeper and more sustained than previously thought, regardless of the legislative outcomes.
As a result, already weak markets such as autos and housing are expected to get worse, O'Callaghan said.
Samir Salman, chief executive of auto parts supplier Continental AG in North America said it is unclear if the U.S. market has hit bottom.
"The way we see it, we think we are coming near to the bottom and hoping. We don't know that," Salman told Reuters. "We are hoping that the bottom will be in 2009 and we have indications that it should be there."
