By Halia Pavliva Nov. 3 (Bloomberg) -- Platinum sank for the first time in five sessions in New York on concerns that demand for the metal may fall further as U.S. automakers cut back. Palladium rose. Manufacturing in the U.S. contracted at the fastest pace in 26 years last month as the credit crisis deepened and buyers slashed orders. Most platinum consumption is for auto parts. General Motors Corp. reported a 45 percent plunge in October U.S. car and light-truck sales, the steepest drop since 1945, while Toyota Motor Corp. recorded a 23 percent decline. ``We are still in a bear market for the platinum group metals, so the downward pressure will continue for the foreseeable future,'' said Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York. ``Only if auto sales improve will we see any change.'' Platinum futures for January delivery fell $4.50, or 0.5 percent, to $827.10 an ounce on the New York Mercantile Exchange. The metal has fallen 46 percent this year. Platinum is down 64 percent from a record $2,308.80 in March, including a 19 percent drop last month, the fourth straight monthly loss, as auto sales plunged in U.S. and Europe. Ford Motor Co.'s U.S. sales slid 30 percent last month, while Honda Motor Co.'s dropped 25 percent and Chrysler LLC reported a 35 percent decline. Two of the ``Big Three'' Detroit automakers, GM and Chrysler, may combine as a freeze on car loans helped push 2008 industry sales toward a 15-year low. Car manufacturers use about 60 percent of global platinum output, according to estimates by Johnson Matthey Plc, a London- based metals trader, refiner and researcher. Carmakers put the metal in exhaust-system parts that filter out noxious gases. Palladium Palladium futures for December delivery jumped $2.75, or 1.4 percent, to $202.30 an ounce. The most-active contract is down 47 percent this year. Industrywide, U.S. auto sales plunged for the 12th straight month in October, extending the longest slide in 17 years. Tight credit, falling consumer confidence and the weakening economy, the same forces that suppressed buying in September, hurt automakers again last month. The Institute for Supply Management's factory index, a barometer of manufacturing activity, dropped to 38.9, the lowest since September 1982, from 43.5 in August, the Tempe, Arizona- based group reported today. A reading of less than 50 indicates a contraction. Hedging Dollar Decline Some investors buy precious metals priced in dollars, including platinum and palladium, to preserve value when the dollar declines. The dollar fell as much as 1.3 percent against the euro before erasing the decline and rising 0.8 percent to trade at $1.2632 per euro at 3:23 p.m. in New York. ``There are continuing talks of more rate cuts to come from around the globe in an attempt to continue to bolster activity,'' Heraeus's Perez-Santalla said in a research note earlier today. ``In the meanwhile, precious metals seem to be forming a base. With stability in commodities, it should prove to be helpful for businesses in the long run.'' The European Central Bank and Bank of England will lower their benchmark interest rates by 50 basis points on Nov. 6, according to Bloomberg surveys. One-hundred basis points equals 1 percentage point. The U.S. gross domestic product contracted at a 0.3 percent annual rate in the third quarter, the biggest decline since 2001, the Commerce Department reported last week. To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.

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