Car Makers See End to Sales Slide
July 06, 2009
– Comments (14)
I've been off-line for a couple of days, so I am going to backtrack and post a link to a great article that the WSJ ran on its front page on Thursday. The piece confirms what I have been saying for months now, that U.S. auto sales have bottomed and they will not fall below 9.5 to 10 million units in 2009 and they will very slowly begin to recover in 2010 and beyond.
Car Makers See End to Sales Slide
Here's what the country's largest automakers have to say about the current sales environment for light vehicles.
Toyota vice president Bob Carter: "We believe the industry is moving beyond the bottom. The weak economy's grip on the auto industry appears to be lessening."
Ford's top sales analyst George Pipas: "The auto-industry downturn appears to be nearing a turning point."
Ford senior economist Emily Kolinski-Morris was recently quoted as saying that vehicle sales for the full year could possibly 10.5 million units.
General Motors's GM's sales and marketing chief Mark LaNeve: "...feels pretty strongly that the bottom was hit earlier in the year."
Is 10 million units great when we were selling 16 to 17 million units annually for the past several years? Of course not. There's still a ton of overcapacity out there. However, the auto sector has been a major drag on the economy. Almost all major automakers have dramatically slowed or completely stopped their production over the past several months. The new vehicle inventory situation is improving and automakers are going to have to start producing vehicles again. The "Day's Supply" of new vehicles (an industry inventory metric) now sits at only 61. That's right in line with where it was a year ago and down from a shocking 116 in January (the worst that I recall seeing industry-wide it in my fifteen years in the industry).
New vehicle inventory levels are at the point where production will have to increase to keep pace with slightly stronger consumer demand in the second half of the year, increased demand for fleet vehicles, and a small amount of incremental volume created by the flawed cash for trash program.
Increased production will help both the GDP and employment numbers over the coming months. I have said repeatedly for a while now that I do not expect the U.S. to experience a fast "V"-shaped recovery, but things have stabilized and they will very slowly start to improve. As far as stocks go, it appears as though the market has finally come to the realization that I came to some time ago, that Q2 earnings are going to stink and that growth is going to be anemic for some time. I haven't put any new money to work in the market in months, other than shifting some funds from one company to another.
Deej
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