Why the Hell would it? The U.S. “housing crisis” is far from over, money’s too tight to mention, getting credit’s a bitch and the consumer shift to more fuel efficient vehicles has left millions of SUV owners backwards/underwater on their loans. Amongst other things. Anyway, the idea that U.S. new vehicles sales have “bottomed-out” is a combination of wishful thinking and boilerplate bullshit, largely perpetuated by the weasel-word factory known as General Motors’ PR. (Show me ONE MONTH of sales gains and THEN we’ll talk.) As I wrote in my latest General Motors Death Watch, Automotive News [AN, sub] fell for– indeed perpetuated– this spinmeistery hook, line and sinker. In an attempt to atone for their shameless capitulation to Mark LaNeve’s mob, AN has followed-up with a micro-story on Toyota’s take on the American car market’s doldrums [via Reuters]. And here it is: “Despite signs of steadier U.S. auto sales in August, it remains uncertain whether industrywide sales in the largest vehicle market have hit bottom, Toyota Motor Corp. Vice Chairman Kazuo Okamoto said today. ‘It’s hard to say whether the U.S. market has hit bottom,’ Okamoto told reporters. Okamoto, speaking through a translator, also said that despite the recent decline in oil prices, Toyota, the world’s largest automaker, was still assuming oil prices would be higher over the long term as the basis for its product planning.”
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“credit’s too tight to mention”
Huh? You mean, for people who are already drowning in debt?
Even for people not in debt, banks are being more careful to whom they give loans than they were a few years ago.
I can’t speak for nationwide results, but I know at my dealership at least we had a noticeable jump in sales in August vs. June or July.
The housing slump has pretty much bottomed out, and now people are starting to buy up the foreclosed super-deals, gas prices are going down a bit and with rumors of oil going under $80 a gallon by year end may even reach decent levels for a short term, and with a changing of the guard at the White House all but foretold in prophecy by now consumer confidence will be up.
Considering all that needs for the economy to rebound is for everyone to start spending money again what starts as a trickle could become a wave. More spending means more money in everyone’s pockets means even more spending, and, well, you get the picture, the dollar becomes strong again and auto sales go up.
50merc :
“credit’s too tight to mention”
Huh? You mean, for people who are already drowning in debt?
Yeah, for those people. Someone with a strong credit score and a good debt to income ratio can still get favorable financing, but there aren’t nearly enough of those people to maintain auto sales anywhere near the past levels.
Additionally, with the current economic uncertainty even people with good credit are going to be loath to finance a car purchase.
The automakers would like to think that their hyper fuel efficient vaporware cars will be in high demand, but even in a world of $8 gas and abundant, cheap nuclear energy a plug-in hybrid or series hybrid (Volt) is going to have a hard time competing with a used Civic.
There is not a sqeeze on credit.
Man, I just got another home.
IF you are one of those idiots that got a home at a rate that any thinking human would realize was smelly…then you deserve what and where you are.
Right now there are people crying because their mansions are not worth the money they paid for or borrowed on it.
Were they really not sweating at the closing like they should have been?
Credit cards still keep arriving at my 2 kid’s college doors.
These knuckleheads don’t even have a job!
I got in to an argument (I know, not like me) with an accountant because she kept using the term recession.
Recession, I asked?
Do you know what the hell the definition of a recession is, I demanded?
Its 3 quarters of negative growth in a row.
We haven’t even had one, let alone 3 in a row.
This negativism slays me.
Hope I didn’t offend anybody.
I’m not always in a nice mood.
When will the American public STOP using their homes as collateral to purchase new vehicles?
Why does the American tax system allow the interest portion of a home mortgage to be used as a tax write off?
American home buyers who are upside down on their mortgage and owe more then their homes are worth get no sympathy from me. Live within your means. Buy what you NEED not what you WANT and this will never happen to you. Suck it up….its a lesson that should last a lifetime.
ppellico
Apparently you don’t “know what the hell the definition of a recession is.” The colloquial rule of thumb is that two quarters of negative growth is a recession, not three, but even that definition, while generally accepted by the media, is only a simplified reading of a 1974 New York times article:
http://money.cnn.com/2008/05/05/news/economy/recession/index.htm
Anyway, whether the US economy experiences two quarters of negative growth or is kept just above contraction by spending on booze, gambling, fast food, payday loans and domestic military spending financed by Chinese treasury bond purchases is irrelevant to this article. The evaporation of home equity and the return of lenders to the practice of loan underwriting means that the automakers are screwed – Toyota’s thesis.
I also just bought a well discounted house, aided by strong credit and a low DTI, but that is the exception. A huge number of people that could have qualified to buy a car on credit two years ago can’t now – that’s a credit squeeze.
The credit squeeze is indeed happening.
An example. My father just purchased a 2008 Vette Z06. He wanted to pay for it in cash, but the dealer told him to finance because of the zero percent interest rate being offered. My father’s credit scores are all at least 800, and he has three paid off mortgages on his report. You would think he would qualify for a loan of this nature in an instant, and he did, however a few days later he got a call from the dealer that GMAC needed more information to approve the loan. It seems since my father has only one credit card and does not use it much they were cautious. It took two weeks to straighten the whole thing out and finally get the loan officially approved.
“Toyota, the world’s largest automaker, was still assuming oil prices would be higher over the long term as the basis for its product planning…”
See, GM? Toyota has a guy who sits around and figures out what kind of conditions the auto manufacturers will face in the future. It even does “product planning” based on what that guy thinks.
If only GM had one of those guys five years ago. I’m almost afraid to ask whether it has one now.
3 negative quarters in a row? After the Black friday in 1929 did you also wait for 3 quarters to conclude that there was a recession? Your GDP presents Asian money being wobbled around US economy, what matters is division of services/manufacturing within GDP.And it is at all time low barely above 10% of total composite.( China`s manufacturing sector accounts for 43% of her GDP). 2million houses in forclosure at all time high, jobless rate creeping over 6 per cent. Trade balance at record high negative. ExternalDebt as percentage of GDP approaching World WAR II levels.And still think you are doing pretty good?
If it walks like a duck and sounds like a duck, well guess what it is? One can nitpick all they want about textbook definitions, but this economy sucks, pure and simple. All the economic indicators are bad, except perhaps for that 0.5% at the top, but for average Americans, it hasn’t been this bad in years.
golden2husky
OK…now that’s a great definition.
I will teach my kids that way to really judge situations.
And come on, people.
There justr has to be a definition if we are going to call people, Presidents…whomever, out.
Without a definition.
Without any guidance or rule or law…we can then all cry out anything we want.
You can point fingers and accuse away freely, without any fear or accountability.
I don’t think so.
Not around me.
You want to cry wolf..I am gonna mmake you show the animal.
Yes, there is a housing slowdown.
Big deal.
Where I come from, this is wonderful news.
The developers were out of control removing the world’s top farming soils for crap, cheap housing.
Everybody was getting their homes.
No yards…but monster homes.
These are Wonderful times for me.
And the price of oil run wild with the fear of speculation is again, all good.
We are seeing people put away their stupid Excursions and take the family car to get groceries.
I called my wife from the tennis courts tonight.
I told her she just had to see what I was seeing.
The little football league games were on.
A hundred women in giant SUVs fighting and yelling at each other for parking that wasn’t there.
It was amazing.
Yes, thank GOD for the gas crisis!!
And this has had more to do with the current economy than anything else.
People are affraid.
But fear is not a real measurement of the situation.
Its simply an emotion.
The big push by banks to encourage people to use the equity in their homes as a piggy bank has been a big part of the so called growth of the consumer economy and is now a big part of the problem.
Borrow and spend is not the way to build a healthy economy … but that is exactly what consumers and the government have been doing for the past several decades.
I’m glad to say that I’m old fashioned enough as to never have borrowed money against our home. In fact, we are paying our mortgage down at a much faster rate than scheduled. Silly me … I want to own my home free and clear well before I hit 60 years of age. Sure we could have easily taken out home equity loans to do a bunch of remodeling, travel the world and put $150k worth of depreciating automobiles in the garage (like so many of my Silicon Valley neighbors have done). Sure glad we didn’t do so!
Consequently, some growth which theoretically could have happened in the local economy had we joined the borrow and spend party these past ten years didn’t happen. But, if those who used to do that kind of thing now have to live within their actual cash incomes then we are going to continue to see declining markets in the “near luxury” and “luxury” categories of all manner of goods and services. Many of the people who were buying Coach bags and Escalades were doing so on borrowed money they really had no business borrowing. That crowd is pretty much tapped out now.
Toyota is right. Nobody knows where the bottom of this thing is.
Many years ago I like to think I coined a new term called Group Stupid.
I used it to explain to my then very young, soon to be drivers that they were all very bright honors student at school.
However, somehow when a bunch of normally brilliant kids got together, something very strange happens…something called group stupid.
This thought could be anything from “Let’s get drunk and drive…” to let’s drag race that bastard with our lights off”…whatever.
BUT somebody in that car has got to call out the stupid idea.
Somebody has got to stand against the crowd and the mass hysterial.
So, when the media wants to get you excited about the news, they ain’t gonna shout out that something good happened today.
They are going to scream fire, flood…anything that will get you to slow down as you pass by and stare.
That’s just what we people do.
We slow down for the body, but we race by the beauty.
We are excited by the bad news.
Otherwise, why aren’t we hearing about Iraq anymore?
You know why.
It ain’t good sales.
So you just keep on thinking the end is here.
The country is in dire straights.
The economy is the shits.
But I think its another grown up example of the group stupid concept.
I will go out and buy something some panic stricken idiot wants to unload…at a loss.
Don’t anybody take this personally.
Its just an example, a play on something?
I was talking about “the people?”
You’re not stupid.
no_slushbox: “A huge number of people that could have qualified to buy a car on credit two years ago can’t now – that’s a credit squeeze.”
I see. A credit squeeze is when lenders return to sane-and-sensible lending standards afte a period of “irrational exuberance.”
jurisb: “After Black friday in 1929 did you also wait for 3 [or 2] quarters to conclude that there was a recession?”
People probably waited longer than that. Little economic data was available, so the stock markets were treated as proxies for the economy. Actually, GDP was probably shrinking well before October. Alfred P. Sloan took a long trip around the country in ’29. Back then the car companies didn’t monitor dealer inventory. The dealers he visited shared the prevailing optimism about the future, but were unhappy and puzzled about the accumulation of inventory at their own stores. On Sloan’s return to HQ he ordered an immediate slowdown in production, thereby avoiding the overproduction that would hit most other firms.
golden2husky: “All the economic indicators are bad, except perhaps for that 0.5% at the top, but for average Americans, it hasn’t been this bad in years.”
I’m sure Michiganders and employees of big city newspapers would agree. But many other “average Americans” are doing fine despite being told by the MSM that the sky is falling. We won’t have an official declaration of a recession’s beginning for 6 to 18 months after the fact. Indeed, it’s such a tricky business, according to scorekeepers at the National Bureau of Economic Research:
“Real GDP rose substantially after November 2001. However, this growth in real GDP resulted entirely from productivity growth for an extended period. As a result, the growth in real GDP was accompanied by falling employment. Unemployment rose because of falling employment and because the labor force was rising. While the NBER has traditionally placed substantial weight on output measures, one could instead define expansions and recessions in terms of whether the fraction of the economy’s productive resources that is being used is rising or falling (in which case the behavior of the unemployment rate would be a critical guide to whether the economy was in expansion or recession), or in terms of whether the quantity of productive resources being used was rising or falling (in which case employment would be a critical indicator). Either of these alternative definitions is defensible, and either might lead to the conclusion that the 2001 recession lasted much longer than 8 months and that it might not have ended yet.
Sorry to say, but guys, you are in the last recession of your country. There will be no more recessions after. Don`t perceive it as a good news.
The problem with calling a recession in advance of the data is that over the past few years there have been a good amount of educated people saying we were in a recession every quarter.
I suppose that eventually they may be correct.
Here’s another way of looking at economic health: GDP per person. Since the US population grows at about 1% annually, the first 1% of GDP growth should discounted. Any GDP growth at or less than 1% should be considered negative growth: recession.
If you apply a GDP/person formula to other countries, like Japan, which has a shrinking population, it makes their GPD/person figures look much better, and relatively fast growing countries like the US look worse.
The problem with calling a recession in advance of the data is that over the past few years there have been a good amount of educated people saying we were in a recession every quarter.
I think that there are a lot of basic misunderstandings of what exactly GDP growth is, and how it can reading it too strictly can lead to excessive optimism during inflationary periods like this one.
GDP is the sum total of four basic components: consumer spending, business investment, government spending and trade (exports, minus imports). The econ formula for this is GDP = C + I + G + (X – M).
Let’s take these one piece at a time, comparing 2nd quarter 2008 with 4th quarter 2007 –
-The US runs a massive trade deficit, so X-M is a negative number. To get positive GDP growth, the other figures have to be large enough to make up for it.
-In recent periods, including 2008, I (business investment) has also been falling, presumably due to business contraction and to offshoring (job exports.) So that leaves consumption (C) and government spending (G) to do the heavy lifting.
-C has been increasing significantly. During the last two quarters, almost the entire amount of the increase in GDP ($257.3 billion out of $281.3 billion) has come from consumer spending.
If you look at how consumers actually increased their spending, a lot of that money went to food, fuel, utilities and medical care. Of course, a lot of that spending is simply inflation rippling through the economy.
-The increase in G makes up the difference lost to to falling business investment and the trade deficit. Of the piece of it belonging to the federal government, about 3/4th’s of the increase over the period was due to defense spending.
In other words, this wonderful GDP growth that is supposedly a symbol of our economic strength is actually measuring the squeeze on consumers and business, the cost of the war, and the burdens being placed on state and local government.
Businesses are cutting back their spending, while consumers pay more for staple goods, from food to home utilities to fuel for their cars.
What’s filling the gap is the various levels of government spending more money. State and local governments are also stuck with inflation, the cost of taking care of the unemployed, etc., while the feds are caught paying for the war.
It really doesn’t matter whether or not there is officially a “recession”. You can measure the impact of the declining economy by seeing businesses cut back, by consumers spending less on durable goods and non-necessities, and with unemployment increasing. Add to that in the increase of population, and you end up with a losing economy. At least Toyota is prepared to cope with it.
Pch101
Whatever…
All I am asking for is a stable base by which to discuss.
IF you can not have a definition, then there shouldn’t be a word.
I am sorry, but no floating definitions.
All I’m hearing is…”It depends upon what the meaning of recession is…”
Right, Bill?
If all you are saying is technically there is no definition, but times are worse than another time…so what.
A bad time for one is a good time for another.
Slow growth to me is very good for a great many reasons.
Stop and think about it everybody.
What the hell would happen IF we solved the oil problem?
Can you imagine what a horrible crisis we will have caused ourselves?
If you think we have urban sprawl now…
If you think we have crowded freeways now full of suburban commuters in SUVs driving alone to work…
IF you think we have lost to much farmland now to developers without souls…
Just wait until that dream comes true.
Its like my wife said…every action has a reaction.
They are saving my life with drugs, but then again…I’m still here!
AS Gordon Brown says “Recession – what recession!”
All I am asking for is a stable base by which to discuss.
I apologize if the world isn’t as simple as some might like it to be. But it isn’t.
Some would like to believe that 2% growth is 2% growth, no matter where it comes from. I’m pointing out how overly simplistic that is.
As a parallel example in the car world, on this website, there is much discussion of fleet sales vs. retail sales. Savvy readers have come to realize that selling large volumes of cars as cheap rentals is not as good as selling them at retail.
Some people, particularly those who wish to be in denial, adamantly refuse to accept this. But the smart readers have figured out that all sales are not created equal.
A 2% GDP growth rate that comes from inflation and the escalating price of basic staple goods, escalating health care costs, and governments stuck with the cost of a war and unemployment benefits is not as good as growth that comes from consumers improving their lifestyles, businesses investing in the economy and government creating infrastructure that we can use in the future. When the “growth” comes from the wrong places, it’s a negative, not a positive.
If these inflated costs of rising utility costs, escalating food costs, etc. are removed from the equation, then we had little or no growth during 2008. You can either accept that for what it is or pretend it isn’t happening and deny it.
Don’t get wrapped around the axle comparing 2008 to 1929. If it happens, the effects will be several years down the road. By end of 1933 GDP had declined 50 percent from 1929 and 25 percent of the workforce unemployed. Unemployment did not go below 14 percent rest of the decade. Average GDP 1930 – 2007 is 3.4 percent per year. One standard deviation is 5.1 percent meaning wild swings are normal economic performance. GDP is reported as inflation adjusted unless stated as Nominal GDP which is not adjusted.
Just a thought, maybe this combines the two theories. Maybe the economy has reached a point of ‘saturation’. The majority of people have enough houses, enough cars, etc.
Perpetual growth is not possible in durable goods markets, because after a while everyone’s got one, and when times aren’t booming, not everyone has a reason to get a new one….