Auto Sales Still Dropping

From the WSJ:

General Motors Corp., the No. 1 U.S. auto maker in terms of volume, posted a 0.28% sales boost during the month compared to September 2006 despite a pull-back in sales to fleet buyers, such as rental-car companies. GM got a lift from a host of new products, including large crossovers such as the GMC Acadia, and tactical sales incentives on pickup trucks and large sport-utility vehicles. GM shares rose $1, or 2.8%, in New York Stock Exchange trading to close at $37.05.

Ford Motor Co., however, suffered a 21% decline in sales, as slumping demand for truck models such as the Explorer SUV and the F-Series pickup offset more robust sales of new crossover vehicles such as the Ford Edge. Still, Ford shares rose on the Big Board to close at $8.57, up 4.1%.

Toyota Motor Corp., now No. 2 in the U.S. market, suffered a 4.4% decline in sales, as sales of Toyota brand SUVs skidded 9%. Among other significant players, Chrysler LLC said sales fell 5.4%, while Honda Motor Co. reported a 9.4% increase in sales, powered by a 27% jump in sales of the Accord sedan, including a redesigned Accord introduced early in the month.

The overall seasonally adjusted annual rate of sales equaled 16.23 million vehicles during the month, according to Autodata Corp. The result was reasonably better than many analysts and auto-company officials had been expecting, after August's relatively weak showing. But the latest sales pace was still well below the trend set over the course of the decade and into the early months of this year. Most analysts now expect total light-vehicle sales in 2007 to crawl to 16 million vehicles, well below the 16.7 million rate that is generally considered healthy.

These are terrible numbers and show the consumer is still pulling back. It makes me wonder about the strength of last month's durable goods personal consumption expenditures which showed a strong increase. This was despite the drop in home and auto sales.

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Auto Sales Still Dropping

From the WSJ:

General Motors Corp., the No. 1 U.S. auto maker in terms of volume, posted a 0.28% sales boost during the month compared to September 2006 despite a pull-back in sales to fleet buyers, such as rental-car companies. GM got a lift from a host of new products, including large crossovers such as the GMC Acadia, and tactical sales incentives on pickup trucks and large sport-utility vehicles. GM shares rose $1, or 2.8%, in New York Stock Exchange trading to close at $37.05.

Ford Motor Co., however, suffered a 21% decline in sales, as slumping demand for truck models such as the Explorer SUV and the F-Series pickup offset more robust sales of new crossover vehicles such as the Ford Edge. Still, Ford shares rose on the Big Board to close at $8.57, up 4.1%.

Toyota Motor Corp., now No. 2 in the U.S. market, suffered a 4.4% decline in sales, as sales of Toyota brand SUVs skidded 9%. Among other significant players, Chrysler LLC said sales fell 5.4%, while Honda Motor Co. reported a 9.4% increase in sales, powered by a 27% jump in sales of the Accord sedan, including a redesigned Accord introduced early in the month.

The overall seasonally adjusted annual rate of sales equaled 16.23 million vehicles during the month, according to Autodata Corp. The result was reasonably better than many analysts and auto-company officials had been expecting, after August's relatively weak showing. But the latest sales pace was still well below the trend set over the course of the decade and into the early months of this year. Most analysts now expect total light-vehicle sales in 2007 to crawl to 16 million vehicles, well below the 16.7 million rate that is generally considered healthy.

These are terrible numbers and show the consumer is still pulling back. It makes me wonder about the strength of last month's durable goods personal consumption expenditures which showed a strong increase. This was despite the drop in home and auto sales.

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Auto Sales Figures

From Seeking Alpha:

Yesterday marked the release of February light vehicle sales figures and the results again showed a loss of market share among the 'Big 3' U.S. automakers, particularly to Japanese carmakers. Ford and DaimlerChrysler reported declines in sales, 13% and 7.7% respectively, versus a year ago's sales. Reversing its own downward trend, GM said its sales rose 3.4% from the year earlier period.

This news combined with Ford's press release that restructuring would cost $11 billion makes that company very suspect. GMs increase is good news, but I still have a problem with a bullish perspective for that company.

All three of Japan's 'Big 3' reported YoY sales increases, paced by Toyota at 12%, while Honda (3.2%) and Nissan (1.2%) also registered gains.

It looks as though the US consumer is clearly moving toward Japanese cars in a big way. I am guessing some of this has to do with fuel efficiency. However, the Japanese car makers also have lines of trucks and SUVs, so there are probably other factors in these numbers.

Despite an industry-wide YoY sales drop of 0.5%, the seasonally adjusted annual sales rate held steady at 16.6 million; Bloomberg consensus estimates were for an annual rate of 16.1 million sales.

Right now car makers are competing for the same size economic market -- at least on a seasonally adjusted basis. With US GDP growth slowing, I have to wonder how long that will last.

The total market share of the U.S. 'Big 3' fell to 54% from 56.6% in February 2006. GM managed to increase its market share 1% to 24.6% total. Asian automakers up their share from 37% to 39.4%.

There's been a slow war of attrition going on between Japan and Detroit for the better part of 25 years. Japan obviously has a better long-term strategy at this point -- largely because they have a long-term strategy.

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Ford Restructuring -- $11 Billion

From AOL Money News

Ford Motor Co. said Wednesday that its restructuring plan would likely cost $11.18 billion, with more than half of the expenses devoted to programs for laid-off workers.

In a filing with the Securities and Exchange Commission, the No. 2 U.S. automaker estimated spending $5.96 billion on a jobs bank and other "personnel-reduction programs," $2.74 billion to scale back its pensions, $2.2 billion for fixed asset impairment charges and $281 million to idle plants.

Ford said in the filing that it had already accrued $9.9 billion in 2006 and the balance, mostly related to salaried personnel-reduction programs, would be accrued during the first three months of 2007.

The company also disclosed that it has pledged all its buildings, trademarks, intellectual property, shares in the main company, and shares in Volvo, Jaguar, Aston Martin, Ford Motor Credit Co. and other operations as collateral for a $23.4 billion line of credit to fund its restructuring plan and cover losses expected until 2009.

I've been watching the stock of GM and Ford rise for the last few months and scratching my head. Traders are obviously playing the turnaround story, hoping today's efforts to improve their respective positions will pan out. But I haven't seen any encouraging results yet. Ford is in hoc up to its eyebrows -- it has pledged all of its assets against its credit line. Both Ford and GM have a ton of costs coming up and declining market share. I just don't see the turnaround happening yet.

Of course, I've been wrong before so take this with a grain of salt.

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Auto Sales Could Slow

From the WSJ:

an automotive outlook report this week, IRN Inc., a Michigan market-research firm, predicted an economic slowdown in 2007 and says "sufficient evidence" supports a recession sometime this year. "Look for other analysts and the Big Three auto makers to make some significant reductions by the second quarter regarding their outlooks for 2007," it said.

"The automotive outlook is too high" on Wall Street, said Erich Merkle, IRN's forecasting director, in an interview. Citing a drop in housing starts and rising durable-goods inventories, he added, "I think that there are a lot of folks out there that have yet to account for the possibility of a significant slowdown in economic performance as 2007 unfolds."

IRN reduced its 2007 sales forecast in December to 16.1 million cars and trucks from 16.3 million. That number could go lower, Mr. Merkle said. Last year's sales totaled 16.6 million, according to Autodata Corp. Analysts and economists who forecast car sales are considering economic indicators, but most have stuck with their predictions.

The US auto industry has many problems. First, they are tied to selling large autos in a rising gas environment. At some point consumers will become more interested in MPG than horsepower and size. That shift may already be taking place.

Secondly, they are all looking at serious cost issues that they most negotiate around. Health costs especially are a big issue.

Finally, there is the US consumer's position. Consumer spending as increased continually since 1996. At the same time, household debt outstanding has increased as have household debt payments. At some point the consumer will reign in his spending and start to focus more on paying down debt.

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Chrysler Cuts Production: Industrial Production to Follow?

From the AP

The Chrysler Group, which had an operating loss of $1.475 billion in 2006 and expects to show losses through 2007, announced Wednesday that it would eliminate 13,000 positions, including 11,000 production jobs and 2,000 white-collar posts, as it seeks to cut costs and return to profitability in 2008.

Of the production job cuts, 9,000 are in the U.S. and 2,000 are in Canada.

Chrysler, part of Germany-based DaimlerChrysler AG, said Wednesday it plans to close the Newark, Del., assembly plant during the next two years and cut shifts at plants in Warren, Mich., and St. Louis. The company also announced that a parts distribution center which employs 100 workers near Cleveland also will close this year.

On Thursday, company officials said much of the impact would be in southeastern Michigan, where 5,300 people will lose their jobs by 2009.

Yesterday, the Fed released the January Industrial production numbers. They decreased by .5%, largely caused by a big drop in auto production. This plan will go into effect throughout 2007 and probably into 2008. This means another US automaker is scaling back production. Don't be surprised if this hits the industrial production numbers going forward.

I should also add the Ford (F), GM (GM) and Daimler Chrysler (DCX) stocks have all rallied over the last few months, probably in anticipation of these plans working. I have been wondering if these rallies were warranted given the underlying problems of these three companies.

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