* Light vehicle sales tumbled 18% in 2008, to 13.2 million units from 16.1 million in 2007, with the selling rate deteriorating significantly in the second half of the year, finishing with a barely-breathing 10.3 million SAAR in Q4.
* Sadly, it looks like 2009 will be even worse than 2008. Our latest forecast for 2009 US light vehicle sales is a shade under 12.0 million units, which is down from our earlier forecast of 13.0 million, and down another 9% versus 13.2 million in 2008.
* North American light vehicle production in this scenario should be in the range of 10.6 million units, down about 13% vs. 12.2 million in 2008, reflecting the sequential decline in sales, as well as an oversupply of vehicles remaining on dealer lots at year end. The year-to-year drop in production should be even more pronounced for the Big 3 (about 19%).
* If there is any good news here, it is that the shape of things should be better in 2009 than in 2008. In other words, we expect the exit rate of sales in 2009 to be better than the entry rate. The exact opposite was true for 2008.
* But settling in at a 12.0 million sales pace in 2009, even after running in the low-10s in the fourth quarter, will not be enough to invigorate the stocks, in our view.
* Indeed, the Big 3 and many suppliers will still be burning cash in a 12-million market, especially considering that the drop in production will be more pronounced than the decline in sales.
* Revisiting our sector thesis from last year, we note that auto stocks – particularly the OEMs, and in this case we would include Big 3-dependent suppliers – generally do not work during or after recessions until US vehicle sales start to trend meaningfully higher. And going sideways from 13.2 to 12.0 (even with a 10.3m quarter in between) is not going to cut it, in our view.
• We maintain an Underweight stance on the group.
Ouch. Look for BO to stink up the place with more money-give-aways to “encourage” his voting base to continue to buy cars they can’t afford with taxpayer handouts.
I’m guessing the wrapper will look like this: “green car CO2 reduction global warming initiative – buy new cars to replace old polluting, gas hogs”.
Of course, when I drove in this morning, we were at 7 degrees F. and will be for the rest of the week; the European President is far more intelligent and isn’t caught up in the religion of Gore and states that global warming is bunk (along with a LOT of reputable scientists who also are predicting the possiblity of a solar Minimum).
Look up Maunder Minimum and have a read; it was one of four solar minimums in a row from 1350-1815, which comprised the “mini-ice age” and cause privation and starvation due to extremely short growing seasons.
Then stop, think and realize that God’s creation is far bigger and greater than mankind and be humbled a little, instead of believing every crack-pot idiot failure ex-presidential candidate with an agenda to keep more “energy” for he and his rich cronies and therefore wanting to limit how much average joe has.
http://newsbusters.org/blogs/jeff-poor/2009/01/14/cnn-segment-warns-coming-ice-age
Here’s a question….
If they stopped new car development at the point where it is right now would anyone care and would it matter ?.
The cars we have today perform well enough and are reliable enough to satisfy most people. I’m 42 and could happily go on for the rest of my life owning a 2008-2009 car if new car development were to somehow be stopped and frozen at the point we’re at now. There’s so many good cars out there now I wouldn’t need anything “better”. What really is “better” anyways, a few more electronic gadgets and gizmos I don’t need, or some styling changes to keep it looking fresh ?.
It’s really cold out. Therefore global warming is a crock.
I love this logic. If you can call it that.
Well, usta bee, what if they’d have said that in 1960?
Look. My first car was a 1966 Ambassador, 327 cu in V8, 270hp, automatic. 0-60 in just under 10 seconds, approx 120 mph top speed, roughly 15 mpg overall, and best highway mileage of 17-18 mpg. While it had rougly 1/2 the pollution of a 1960 car (PCV valve instead of road draft tube allowing blowby out the bottom of the engine into the air), it was literally about 500 times more polluting than a modern car. Yes, a 1960 car pollutes about 1000 times more than a brand new car – literally. This is not to say we should remove classic cars from the road – after all, the typical classic car is well maintained (can’t say that about daily drivers which can pollute as much as old cars), and classic cars are generally only driven a few hundred miles a year. As was my 1963 Corvair before I broomed it last year (just in time, prior to the economic melt-down, as it transpired).
My wife’s 2007 Hyunda Sonata is equally large and comfortable as my 1966 Ambassador, and it has a 144 cubic inch (2.4 litre) four cylinder engine, automatic transmission. 0-60 in just under 9 seconds, approx. 125 mph top speed, roughly 25 mpg average and best highway mpg of 33 mpg.
While I laud our automotive progress, I’m actually looking forward to the options of having CNG powered hybrids (Toyota Camry CNG hybrid prototype at the Detroit Auto Show right now), electric commuter cars (Aptera; yes please), and whatever else the brightest and best auto minds and other minds, too, can dream up, built, market, make a profit on, help the economy and bring work to folks as well as continue to provide the population with independence and an enjoyable life.
Progress shouldn’t simply stop.
But I think I “get” what you are saying in that cars have vastly improved (well, some of them – cough – Chrisisler Sebring and others not included – cough).
Talk to me about global warming in 2012, bunkie.
We’re potentially in for about 70 years of VERY VERY cold weather, starting 11 years ago (1998). Not only is there a real potential for a solar minimum (there’s a newsflash for you – the SUN actually provides 100% of our warmth…. or lack thereof, when it goes through natural, periodic cycles of cooling), but apparently, there is the factor of planetary wobble or some such thing (periodically more tilt of the Earth?) as well as planetary astrophysics for our solar system (I do believe that the earth is temporarily moving very slightly away from the sun due to the action of the other giant planets on our orbit).
Plus, water vapor makes up most of the planetary “global warming” gasses, as in 96%, while CO2 is about 4%. Even the measurements of CO2 are questioned by real scientists.
But you don’t have to believe me. Just wait about 3 more years and then we’ll revisit the subject here if you wish!
Hope I’m wrong. I could use a little global warming about now.
This forecast assumes car sales don’t recover from their Nov-Dec ’08 sales volumes. Most economist predict the economy will improve in 3rd and 4th quarters of ’09.
I don’t put much credence in these forecasts before the Jan “09 sales #’s have posted. These analysts are typically 29 year old recent MBA’s who don’t know their “ass from their elbow”. These clowns are the ones who helped to create credit/bank meltdown!!!
I’ll think about a new car once the S&P 500 gets back to where it was a year ago–and I feel like I have some money again.
It really is a shame that this slump in sales has come along at this time. The Detroit 3 will never be held accountable for the mess they allowed to happen over the last 20 years. I bet even the business management courses tht we used to think would analyse their performance as a case in how to destruct a company will in fact assert that the loss of any of the Big 2.8 is a result of the poor economic climate of our day and that they were victims of the times. All of the items which initiated the “Deathwatch” series seem to be shovelled under the credit crisis and all of thoses valuable business lessons will be lost.
The only place I see any real referance to lost customers due to dealer issues, poor quality and customer abuse and poor marketing is here on TTAC and I am sure that this is put off as a bunch of disgruntled gear heads. Even now you can bet Rick Wagoner is telling his board, and no doubt the next bail out hearing that he had a great turn around plan and how could he be held responsible for this unforseen down turn in sales.
All of their mistakes will be washed away in the flood of the bank bailouts and credit crisis.
I was really looking forward to seeing someone in the Big 2.8 be held accountable.
Let’s talk about logic. Increases in CO2 emissions and solar output are two completely independent things. It may well be that we are headed into a solar minimum (and, yes, I am familiar with the Maunder Minimum as well as the effects of the “Little Ice Age”). But it’s not certain. The point being that it’s not logical to use one independant circumstance to disprove another.
But having said all that, what does make sense is a focus on more efficient vehicles. Whether the goal is economic (it’s always good to save money), political (funding unfriendly governments) or simply practical (it would be nice not to have to stop at gas stations as often) or any combination thereof, efficiency and the benefits that come with it are goals worth pursuing.
Look, I think Al Gore is a bit of self-serving guy, but constantly bringing him up is, to me, the sign of poor debating strategy brought on by a lack of substantiated facts.
How did global warming get on a thread for slowing car production?
menno, GMAC is helping Obama before he gets in office with their ridiculous ads for easy credit. Since the new POTUS is already asking to spend $350B more (at least) of our money to help us, he’s proving to be as ignorant as the Bush/Paulson duo.
Americans need to effing man up. We were on a gravy train for far too long. We need to take this one on the chin, cut the crap with the bailouts, and become better savers.
Instead, we get income redistribution on a scale never seen before in this country. Those at the very top and the very bottom will benefit, and the rest of us get squeezed.
And think about it…10.9 million NEW cars on the road next year. Is it really necessary that so many new cars are put on the road, given that today’s cars (well, as stated above…MOST of them, anyway) are capable of surviving much longer than ever before. Perhaps increasing the ownership cycle to 5-7 years (heck, my parents keep cars well over 10!) isn’t that bad of an idea. We’ve just all bought into the belief that we deserved, hell, needed (!) a new car every two to three years. Gravy train is right! This little “market correction” isn’t a bad thing, in my mind.
JKross, I couldn’t have said it any better myself. (as for global warming, well, it’s all interrelated – that’s why I brought it up)
Bunkie, hey, I drive a Prius, okay? Not because of “global warming” but because I got sick of sending my hard earned money to imbecilic morons who wish for me, my nation and my way of life to go away all the while we send them money to later accomplish that goal. Not to mention the fact that good Christian (or Jewish or Athiest or Buddhist or …. ) Stewardship (i.e. not wasting) is always a good plan.
As for BO and the rest of the National Socialists already having been in charge of and soon to be in complete charge of “everything” (and I used that advisedly – yes I am calling them Nazi fascists), let’s look at what they stand for, shall we? Both major parties, in fact.
What is a fascist but someone who insists on all the power, and that their mode of thinking (i.e. “PC”) is the only valid mode of thinking, and that they will take ownership of major private holdings (banks, car companies), and will confiscate income and redistribute it (socialism)?
Not to mention “big-brotherism” of spying on their citizenry.
Well – doesn’t that all fit the bill of the late Bush and soon to come BO administrations to a tee?Be honest with yourself. You can do it!
Has anyone ever read the story of chicken little?
A friend sent the fairy tale to me in email and it was amusing until I realized that at the end, it was altered a little and the “farmers” (BO, Pelosi, et al) stepped in and took away the hard earned bread from chicken little and redistributed it to the other lazy farm animals who refused to help plant, harvest, grind or bake.
So chicken little didn’t bother doing any planting, harvesting, grinding or baking any more… and everyone starved.
Get the drift, everyone? If not, try looking at how “successful” the Soviet Union, Maoist China, Cuba, Yugoslavia etc., were.
“I drive a Prius”
And I drive a Cadillac, albeit one that gets 23mpg overall.
I’d like to buy a new (or newer) car this year. I have the income. I’m not underwater on either my mortage (30-year fixed, 25% down on a modest dwelling) or my credit cards. But a funny thing happened. It seems that the friends of the people I work for (I work for a bank) gamed the system and suckered an awful lot of the middle-class into making really stupid decisions (ARMs! No-Doc mortgages! Flip-and-profit! Your home is an ATM!). The result has been that the hard work of my wife and me is at risk since we’re both fundamentally fiscally conservative and neither one of us wants to make the commitment to such a large purchase given the unemployment risk. And so car manufacturers suffer. And their employees suffer. And we all suffer.
In that I suspect that we are in complete agreement. Where we differ is in how to address this problem. The sad and awful truth about capitalism is that its foremost practicioners are hypocrites. When we need to allow the creative-destruction process to occur (AIG, Citibank, GM and Chrysler bankruptcy, for example), they step in and plead that “we must not allow the system to collapse”. What’s worse is that on one level they are right. A banking collapse would bring on a depression. Yet these same people are the first to sing the praises of the risks when they are flush and regular people are hurting. In this environment, the only power average people really have is to use the government to redress the issues. It is not an ideal solution. But to simply roll over is a terrible mistake. If there is to be a trough, then one simply has to ensure that one gets enough to eat at said trough lest you starve for the benfit of some rich hypocrite.
So, forgive me if I think that supporting the “free-market-at-all-costs” solution is about the single dumbest, most self-defeating strategy possible.
I have to say, the totally free market at all costs model won’t work either, Bunkie.
But interestingly enough, a well designed economic model seems to work wonders, and the ones that seem to have worked “best” for everyone in the past, seem to have had few big brother types staring down people’s necks.
BUT there’s a catch. The actual society itself has to provide sufficient behavioral checks & balances.
Why else do you suppose that our founding fathers stated that our Constitution was only usable for a Christian nation of people? Hence, it is no longer useable (and ignored, in any case).
Either we pull off a collective miracle and do what almost no nation has ever done, and pull out of this massive societal decline – or we go the way of the Roman Empire and all number of prior nations in the history of the world.
Notice I did not say that only Christian nations prosper. I said nations with sufficient behavioral checks & balances.
http://news.yahoo.com/s/ap/20090113/ap_on_bi_ge/as_world_economic_freedom_1
BTW, I work and my wife works, we’re fiscally conservative and have earned all that we have by the sweat of our brow and by sacrificing a lot to get to where we are. When we moved back to the states from the UK 16 years ago, we had $3000 and one stick of furniture, our clothes, some children’s books and some toys.
Now we have a home built in 1999 (remortgaged at a lower rate and down to 15 years fixed interest about the time the rates were at a trough 6 or 7 years ago was it…), two relatively new cars, my wife worked very hard and got her degree, got promoted several times, so did I, and we’ve helped put one son through college.
And now BO and his like want to simply redistribute what we’ve worked hard for to lazy no-accounts who think it’s hard work to go turn in their welfare checks, as well as GM, Chrysler, a bunch of billionaires in banks (sorry) and AIG insurance company.
Yes I understand the necessity of not letting the banks fail. I don’t get the necessity of leaving the guys in charge who put the banks in the position to fail, any more than I “get” why Madoff should be sitting in his penthouse instead of in a jail cell.
Except for the simple obvious fact that there is one set of rules and laws for the very wealthy, and another for the “rest” of us.
Which majorly pisses me off along with oh, about 100 million other Americans.
PS you should simply go down and look at the new Hyundai Genesis, and if/when you buy, they’ll provide you with a year of “coverage” which allows you to simply return the car, if your job evaporates (under certain conditions). That way you get to replace your car when you desire, you get to enjoy life, you get to put a positive spin on the economy (isn’t that what “everyone” wants?), you get to take a car off the lot which is otherwise going to be sitting and costing the dealer money and you get to dicker for a low price, given the current economy!
win win win for everyone. Plus you should have one dang nice car…. I can only dream. Despite the fact that they’re offering Genesis V6’s for $299 per month lease in Grand Rapids michigan (Fox motor), $2600 down and my Prius costs me significantly more per month than that.
I guess that, given the choice, I’d rather have higher taxes and the job with which to pay them than have no job at all. I’ve been in that position and it wasn’t very pleasant at all.
Regarding the Genesis, I saw one on the road recently and must admit that I liked the way that it looked. Truth be told, I’d be happy to downsize from the CTS, but my wife, who is one of the hardest-working people I know and who put herself through law school while holding down a full-time job, wants some luxury and a little cachet. We have been very happy with the current CTS and will probably buy an ’08 CTS certified car early this year provided we both survive the next round of layoffs which are scheduled to be completed within the next three months.
As for Hyundai’s program, I have to say that it’s a bit of marketing genius. The flaw is that if we keep our current car, we would still have a car regardless of what happens (our loan’s almost up on the CTS). If we sell or trade it for a new Genesis and lose one or more jobs we would have no car and the prospect of having to lay out some cash to buy a decent used replacement. But I definitely give them credit for thinking up something new. The big three need to be more creative in this respect.
Blessings on you and your wife, Bunkie. Prayers are said and hope you and she come through just fine.
If all else fails and everything goes pear shaped, please contact me through Robert Farago since the company at which I work is actually hiring and will continue to be doing so, but I cannot mention any details here in public.
Assuming you and she could stand to live in 7 degrees F. that is. (Northwestern lower Michigan).
Menno-
Thanks for your kind thoughts. Forgive me if I get worked up a bit at times. And thanks for your offer. I appreciate it. It serves to remind me that we’re all in this together and we need to remember that.
Now back to cars and the prospect for the market. Clearly, we have way too much supply at the moment. The really interesting question is how much of this is permanent. Frankly, it’s cheaper to keep our current car and I’m sure that’s what almost everyone else is thinking. I can see a couple of possible scenarios:
1) People keep their cars for a longer period of time. This results in a permanent decrease in US sales, perhaps 2-4 million units. After the current surplus works through the system in a couple of years, used-car values go up as there are fewer lightly-used models on the market. Since there are fewer manufacturers and plants, new cars rise in price. The net result is that more of the real costs in car ownership are borne by the buyer at purchase time rather than at the end of ownership.
2) As a result of #1, leasing regains popularity. With higher residuals, it’s easier to get people into new cars. Eventually we end up back where we are now, with a cyclical market driven less by need (replacing worn-out cars) than want.
3) Two to four years down the road, we roar back to 16-17 million annual sales as the recession ends and people get tired or paying for car repairs. The remaining car companies make a lot of money for a couple of years, build more plants and we repeat the cycle.
4) The era of the personal auto begins to wind down. Americans no longer wish to bear the costs of the exurban lifestyle and the need for so many cars drops permanently as more centralization of home and work reduces the need for so much travel.
I can’t say which of these is most likely. But I wouldn’t bet against radical changes at this point.
Do Prius cars obey a completely different set of Laws of Physics?
I find it laughable that anyone thinks driving a Prius somehow reduces US dependency on foreign oil. As long as the car is powered by oil, it contributes to that dependency. If it was a plug-in, or driven my hot air, then we’d be talking.
In other news, GMAC has now lowered their threshold for lending money – a lot, we’re talking way below the median credit rating for Americans, in the low 600s. Hmmm – smells like subprime tactics to me, they must be desperate, and Credit Suisse knows why.
As for BO and the rest of the National Socialists already having been in charge of and soon to be in complete charge of “everything” (and I used that advisedly – yes I am calling them Nazi fascists), let’s look at what they stand for, shall we? Both major parties, in fact.
And TTAC continues to go down hill. I cannot wait for the best and the brightest to start calling Obama another Hitler. Maybe they will just drop the pretenses and begin referring to him as the nigger in the Whitehouse.
Sales will be 9.325M. Learn to love it.
The Grays Harbor Port Dock (don’t bother looking for it, you can’t get there from here) finally landed a car importer for….(wait for it)….their ability TO PARK CARS!!!
Half way up (down?) the coast in no-mans-land. Only way out is the way you came in. The ship was diverted at the last minute. City is positively giddy at the landing of 3,200 cars and the prospect of many, many, many, many, many, many more.
Seattletimes.com
@ Menno:
And now BO and his like want to simply redistribute what we’ve worked hard for to lazy no-accounts who think it’s hard work to go turn in their welfare checks, as well as GM, Chrysler, a bunch of billionaires in banks (sorry) and AIG insurance company.
I must say it’s the current administration that has already done that. BO is going to do everything he can to stop a runaway train, and it doesnt look good. According to Krugman, America will have to inflate its way out of this mess–and do many other distasteful things as well.
If you want to take your personal experience up a notch, imagine how all Canada feels with regard to poor financial regulation and a cartwheeling American economy. We cleaned up our act economically, ran a decade of budgetary surpluses and learned to live within our means. Now we are right back into deficit spending too. Seriously fucked if you want the technical term.
My instincts are that BO will be more effective. I am not confident that the American economy is sufficiently mixed at the moment, but it may be again. And that will require massive government intervention, spending, re regulation and prosecution.
While temporarily satisfying, allowing massive companies, and the entire financial sector to fail would prove disastrous, and has a whiff of the apocalyptic to it. First put out the fire, then deal with the culprits. One could equally argue the Nazis were never properly punished for their inhumanity. They were beaten however, and it built national character and a collective sense of purpose. The cost was atrocious.
My own personal act of vengeance is to be in a relationship with a mathematician who evaluates risk, primarily in corporate bonds. As someone who escaped by the skin of his teeth from ABCP in August 07, I exact my revenge on subprime shenanigans with subpar lovemaking. Booyah!