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Car Makers See End to Sales Slide

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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

14 Comments – Post Your Own

#1) On July 06, 2009 at 11:29 AM, alstry (35.21) wrote:

You expect them to say car sales are going to keep crashing???

Sheesh.....

If millions of people lose their jobs, millions of people will not be buying new  cars....it is that simple.

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#2) On July 06, 2009 at 11:36 AM, TMFDeej (99.46) wrote:

I can't wait until the much talked about ignore button finally arrives at CAPS.

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#3) On July 06, 2009 at 11:54 AM, alstry (35.21) wrote:

Why, because you are afraid of a little scrutiny???

Or are you simply not very confident about your forecast for future auto sales????

Auto sales sucked wind in June, now cities, counties, states and municipalities are cutting jobs and wages by the thousands each week.

Scott Farrell, left, co-owner of Zanzibar Trading Co. in midtown, helps customer Vattey Budge search for a gift last week. State workers who shop at the gift and jewelry store near the Capitol have told Farrell that the first two furlough days eliminated discretionary dollars. The third day cuts into money for necessities.

http://www.sacbee.com/budget/story/2000837.html?storylink=lingospot_top2

If people can't buy necessities...you think they can buy cars?????????????????????????????

The Institute of Alstrynomics forecasts new car sales will drop below 8 Million units before the end of the year....maybe even lower than 7 million.

Remember Deej,

Alstrynomics is all about being RIGHT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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#4) On July 06, 2009 at 12:22 PM, davejh23 (< 20) wrote:

I agree that auto sales may be close to bottoming (for now)...not that they couldn't drop another 10%, but that they won't likely fall below 7 million in the very near future.  However, I don't see a recovery to 16 million any time soon.  You mention a very slow recovery.  What exactly are you anticipating?  I'm guessing that about 10 million will be (temporarily) the new "normal", and growth will be almost non-existant.  Some are pushing for $4/gallon gas taxes, and if oil stops being traded in dollars (possible?), the new normal could be well below 7 million.

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#5) On July 06, 2009 at 12:58 PM, gunark (81.40) wrote:

Domestic car sales may slowly recover, but the same isn't necessarily true for the companies' stock prices.

I wonder if the car makers' stumble may have finally opened the door for cheap Asian manufacturers. The low end will be filled in by Chinese production (see Fiat's collaboration announced today for example) while Toyota et al. will gobble up what's left of the mid and upper range.

In the meantime the domestics will die a slow death on government life support, not unlike what happened with the British auto industry 30 years ago. 

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#6) On July 06, 2009 at 1:15 PM, TMFDeej (99.46) wrote:

I'm right.  Time will tell.  I just find your constant stalking tiresome.  I'm looking forward to the non-event in September and my more accurate auto sales prediction coming true. 

In fact, I'll take things one step further and predict that something good will happen between now and the end of the year.  I won't say what it is so I can't be held accountable for my prediction, but something will happen. 

It could be a stronger than expected economic number, or a rainbow appearing in the sky, or a stingray escaping certain death, or a tornado narrowly missing a bridge...I won't tell you what it is, I'm just going to make a random extremely vague, wide prediction that something "good" will happen before the end of the year.  If nothing good happens between now and then I will stop blogging forever.*

Deej

* As determined by myself of course.

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#7) On July 06, 2009 at 1:18 PM, TMFDeej (99.46) wrote:

Hey Dave.  Thanks for reading.  I completely agree that the days of 16 to 17 million units are long gone...at least for a long while.  It's difficult to say what the "new normal" is for the U.S. auto industry, but if I had to make an educated guess, I'd say that we'll see auto sales of 10 to 12 million in 2010.  I haven't come up with any formal preduction for yext year yet.

Deej

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#8) On July 06, 2009 at 1:25 PM, TMFDeej (99.46) wrote:

Hi gunark.  Perhaps I am just too close to the industry and see what a mess many manufacturers are, but I personally would never buy stock in an automaker.  Doing so is sort of like buying stock in an airline.  How does the old joke go, what's the best way to amass a million dollar fortune?  Start with a two million dollar fortune and invest in an airline.

I missed a huge move in Ford's stock even though I wrote very favorible things about them earlier in the year because the market for light vehicles is such a far cry from what it was like a few short years ago, Ford still isn't profitable, and it has a huge amount of debt. 

There's a lot better places to invest one's money than car companies.  They might be good for a quick trade, but for any sort of longer-term investment there's a thousand places that I'd rather invest.

One would think that Toyota would benefit from the major problems at GM and C and they have to a certain extent.  The problem is that A) Toyota made a HUGE, expensive mistake building the new Tundra / Sequoia plant in the U.S. when it did amd B) California is Toy's biggest market and it is being hit much harder than the rest of the country economically right now.

Deej

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#9) On July 06, 2009 at 1:31 PM, alstry (35.21) wrote:

Can Alstry out analyze an industry insider like Deej???

Can Deej out MOAP(mother of all projections) Alstry???

 

9.09 is not much time......Prepare.

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#10) On July 06, 2009 at 1:34 PM, jesusfreakinco (29.12) wrote:

Deej,

You are way too optimistic.  

Alstry and Davejh23 are more right on.  There are still many unknown and known issues to hit the economy down the line.

If you are right, how would you invest to take advantage of it?  Buy Ford?

JFC

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#11) On July 06, 2009 at 2:06 PM, TMFDeej (99.46) wrote:

Hi JFC .  The funny thing is, I'm actually not very optimistic at all.  I think that unemployment will easily exceed 10%, I think that stocks have soared way too far too fast, and I think that we are going to be in a slow to no growth invironment for a number of years. 

Just because I don't think that we're headed for WW III or that 90% of everyone in the world will file for bankruptcy, or that unemployment will exceed 50% doesn't make me an extreme optimist.

I personally would never buy stock in any automaker.  The time to buy Ford was several months ago when it was trading for a buck and change, not today at $5+.

Deej

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#12) On July 06, 2009 at 5:16 PM, jesusfreakinco (29.12) wrote:

Deej,

It is all about the dollar and inflation.  If the dollar weakens and/or inflation picks up dramatically, the new normal is much lower.  I can't see a way out of our crisis without the USD being lower and inflation being higher.

My two cents...

JFC

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#13) On July 06, 2009 at 5:59 PM, peachberrytea (74.00) wrote:

Deej I think it would be a shame if you stopped blogging. I haven't been reading what your blogs for very long (only a month or so) but your posts have good content and it would be a shame to lose that. Remember that for every troll on these blogs you probably also have a dedicated reader or 2 (unfortunately dedicated readers aren't nearly as vocal as the trolls).

Alstry, you do have a point but please try to be respectful. I think we all are intelligent to know that whatever goes on these blogs do contain shades of opinion and we're able to draw our own conclusions. I'm in the bearish camp too but it's never as simple as "job losses = lost car sales" - there are just so many other factors at play - further government intervention, you name it. Anyone's who been around long enough and actually thinks back on the good and bad decisions they've made should know that it's just not that easy.

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#14) On July 07, 2009 at 10:42 AM, TMFDeej (99.46) wrote:

Thanks for reading and for the kind words, peach.  I plan on continuing to blog, but I have been very swamped with work over the past couple of weeks so I may not be able to post as frequently.  Blogging don't pay the bills ;).

Deej

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