The Slowdown In Housing Does Indeed Affect Auto Sales

Now that the Federal Reserve has left interest rates unattended and I've had a chance to look at how the trickle down effect of this and housing has affected auto sales a few things stand out.

The Detroit 3 are really feeling the pinch of the housing slow down as truck sales are dropping, even Toyota (TM) noted the impact. Toyota Motor Sales USA Inc. executive vice president Jim Lutz said, " The industry stumbled this month, on continued housing weakness" so, those who say the Detroit 3 use housing as an excuse, what do you say to fact that Toyota called it out in July.

Auto retailer results were mixed, no denying that California and Florida auto sales are very soft and those with big foot prints in those markets will feel the impact longer and harder than most. I was watching CNBC and the Wall Street Journal Report last week, and noted that they ran a clip of Mike Jackson of AutoNation (AN) from July 2006, calling out the housing market in California and the outlook for soft auto retail sales in 2007. We turn to July 2007 and see it across the board.

I don't understand why others did not see this and I recently read in a recent article published in autoretailstocks.com and have come to the conclusion Auto Retail Stocks.com must not be talking to people in Florida or California as home equity values are slowing so are retail auto sales. People use their homes like an ATM for big-ticket items.

Another point, clearly the new vehicle sales for 2007 will be around 16 million units, not anywhere near the 16.4 to 16.5 analysts had expected. This is a combination of the housing market and interest rate factors. Another issue is starting to show up, the Detroit 3 are cutting fleet, manufacturers are not selling their product by using incentives to the degree they once did and now they have all recognized that what matters is winning with the consumer. I will note that AutoNation (AN) has been "beating this drum" for the last three years and now we see the effect. In fact, CNW recently said, "The old 17 million auto sales numbers is now 16 million. This is good for the industry to get rid of the other inflated sales numbers and focus on consumer sales. The rest of 2007 will be interesting to watch....housing is going away, truck sales will continue to fall, fleet numbers will come down. What will the Federal Reserve do? The roller coaster continues.