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The Inside Scoop: October U.S. auto sales will be much worse than analysts think

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October 24, 2008 – Comments (8)

 

So I'm sitting at my desk this morning and I my phone starts to ring, I notice that the caller ID says the name of a major publicly traded auto dealer group.  Intrigued, I answer and a secretary says please hold for Mr. XYZ executive vice president of a company that I will not name.  Hmmmm, I thought to myself this should be interesting.  I can't disclose exactly what we talked about, but while he didn't come right out and say it he insinuated that he believed light vehicle sales might be off as much as 40% in October.

This estimate meshes nicely with the anecdotal evidence that I am receiving from dealers.  I spoke with someone at a Porsche store the other day who said that they have had three customers come in all month.  THREE. Granted this is not a big store, but still it is very indicative of what is going on out there right now.

Compare this estimate from someone in the know to the estimate of an industry-wide decline of 29% that was in the headlines yesterday (US Oct Auto Sales Seen Falling 29% To 17-Year Low) and you could have one explosive combination when U.S. manufacturers report their monthly sales on Monday November 3rd.  Of course, there's still a week left in October and sales are always skewed towards the end of the month in this industry so there is time for things to improve slightly.

Still, if I was looking for a quick trade, I personally would short automakers and large dealer groups heading into the announcement.  I probably won't do so because I am saving my war chest to take advantage of what in many cases I believe is irrational pricing of quality companies that I will hold for a number of years (not to mention the conflict of interest), but it would probably make a good CAPS play.

Deej

8 Comments – Post Your Own

#1) On October 24, 2008 at 11:54 AM, JakilaTheHun (99.94) wrote:

I want to short the automakers, yet I have a strong hunch that Uncle Sam is going to bail out GM very soon.  I don't want to take a chance on that happening, so instead, I'll probably simply give it the thumbs down here on CAPS a few days after any bailout (if a bailout is indeed forthcoming). 

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#2) On October 24, 2008 at 12:22 PM, AnomaLee (28.66) wrote:

We will bail out the auto makers. I'm 100% certain of that...

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#3) On October 24, 2008 at 12:31 PM, TDRH (99.69) wrote:

Why bail them out again?   Same as in 1978.   I say let the chips fall where they may.   They had a second chance already and continue to make the same mistakes.

Same poor management, making poor decions, and lacking in vision.

Without the leases they are toast.  They chose to make cars people could not afford to put gas in earlier this year, let alone buy.

 

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#4) On October 24, 2008 at 12:34 PM, GNUBEE (24.71) wrote:

I think the "bailout" for GM will be the loans needed to "merge" with Chrysler.

 

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#5) On October 24, 2008 at 1:14 PM, leohaas (33.21) wrote:

If you believe Deej's story (and I would not know why you wouldn't...), and you also believe a bail out or merger for the US car makers is under way, then the obvious thing to do is to short the foreign car makers! With the Yen going up, I'll be looking at the Japanese automakers in particular. Toyota has already announced that their Q3 sales have dropped compared to last year...

By the way, another good reason not to short the US car makers is that there is very little profit potential in shorting penny stocks!

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#6) On October 24, 2008 at 4:12 PM, barich1 (53.41) wrote:

US auto makers provide too many jobs to let them fail.  In a way they stand for America too, the blow to the countries morale would be too great to allow.   The gov. will do what ever they have to maintain the illusion that this isn't so bad.

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#7) On October 25, 2008 at 1:41 AM, awallejr (81.12) wrote:

I agree with barich1.   The survival of GM at least is important.  We can blame them for lack of foresight, but afterall they were producing the things the american consumer was demanding.  You can't really change these products on the dime.  It does take time.  I think come 2010 things should look alot better for the autos once those new products start rolling out.

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#8) On May 21, 2010 at 3:43 AM, BrandonPaulChevy (< 20) wrote:

well it really depends on how the economy will run. I think some car manufacturers are developing their parts. i believe one local manufacturer is developing its Oil Pressure Switch which makes their cars a lot more attractive to buyers.

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