In our February auto sales preview, we said that all signs were pointing towards another dismal month of auto sales, which would be even worse than January sales. How fitting is it that the stock market is now trading at levels not seen since 1997, and auto sales are at a level not seen since 1982 (that's 27 years). The following table outlines the sales figures, percent change from February 2008, and the change so far in 2009 compared to the first two months of 2008. Volkswagen is the "silver lining" as sales are only down 16.7% this year. Chrysler, which has seen sales drop approximately 50% for each of the past five months, fared "better" than its Detroit counterparts, seeing sales only decline 44.0% as a result of massive incentives.

Well the deadline came (6:00 PM EST on February 17) and went and as I said during the day, the country was left with more questions than answers. I did multiple radio interviews this morning, and the first question from all the DJs across the country was why? Why is the government throwing good money after bad companies? Why would Congress continue to give the automakers money if there is no end in sight? Those two questions really don't have an answer.

Let's recap what the companies (General Motors (GM) and Chrysler) asked for from Congress and the main restructuring activities:

Please sir, can I have some more?-- Oliver Twist (or Stewie from Family Guy, depending on your knowledge of the classics)

Everyone knew that January was going to be a horrible month, but seriously, did anyone expect it to be this bad? I did not. I expected the incentive programs that auto makers are currently running to give some sort of bump up to the sales results. The scary thing is what if these programs actually did give the results a boost? The annual run rate for sales during January is 9.57 million vehicles. That's the lowest level since 1982.

Just as I have been predicting since the Senate voted not to give the automakers a $15.0 billion loan, President Bush and Treasury Secretary Henry Paulson offered a lifeline to the struggling industry totaling $17.4 billion ($13.4 billion now and $4.0 billion come February). This is very different from the original auto bailout proposed in that this is not the final solution. The money today only prevents bankruptcy for hopefully three more months.

I want to make this clear, I am in favor of the bailout, but the fact remains that the government could throw an unlimited amount of money at the automakers and it still won't be the panacea that some are expecting. It seems that some pundits feel that this and TARP have similar objectives. Both are meant to stave off disaster, however TARP is seen as the solution, whereas the move Friday is merely an instrument to buy time. If the government feels that the bill for this industry will only be $17.4 billion, it has another thing coming to it.

The first official step was taken on December 10 to help stave off a bankruptcy by the struggling U.S. automakers. The bill passed through the House of Representatives and was approved by a vote of 237 to 170. Thirty-two GOP representatives voted with 205 Democrats in support of the bill and 20 Democrats and 150 Republicans opposing the bill. The bill, which allocates only $14 billion (of the original $34 billion that was asked for), now moves onto the Senate where it will face much more scrutiny. If Congress thinks that the $14 billion will be enough, I think they have another thing coming. This cautious initial action could end up costing the taxpayers more money in the end.

There is a plethora of dubious language in the current version of the bill that will go to the Senate for a vote. We feel it will fail on the first vote through the Senate as there are still many points of contention. The bill is said to include caps on executive pay (expected), no golden parachutes (expected), no more dividends while the loans are outstanding (expected), and the companies have to get rid of the corporate jets. Personally, I don't understand the uproar surrounding the jets, but it looks like just another example of wealth redistribution. In our opinion, the worst inclusion is the use of equity warrants. We expected the government to take an equity stake in the Company, but the current bill reads that it will receive warrants for up to 20% of the loan value of the companies.

After one of the most tumultuous months in the stock market, where 800 point-winning days were followed by 700 point-down days, it shouldn't come as a surprise that consumer confidence, similar to investors', has been shaken. 

Despite the wild volatility in the stock market few could have expected the extent to which that weakness would be represented in monthly auto sales.  Total light vehicle sales declined more than 31% to 838,156 units; year to date, 11.6 million vehicles have been sold.  Of the 17 automakers that we model, only Audi saw a year over year increase.  Even the once mighty Toyota Motors (TM) and Honda Motor Company (HMC) saw sales decline 23.0% and 25.2% year over year.  This problem started at the beginning of the year with rising gasoline prices, and has begun to snowball despite a sharp drop in gas prices recently as the economy continues to worsen.  General Motors (GM) offered its customers employee pricing during the month of September which accelerated sales for the month but thus caused a drop in October; however, through the end of the year, we are expecting to see incentive driven sales. 

July was a horrible month for the automakers, but many believe it was the trough and that the situation will not get any worse. I believe if we see another spike in gasoline prices, July will not be the worst month. However, if prices continue to decline or even stabilize around current levels, July will likely become the bottom for auto sales.

However, with Americans cutting back on their driving and an expected economic slowdown worldwide, we expect July to represent the worst month. The industry reported sales for the month of August during trading on September 3, and while the numbers were improved from July, the results were still down dramatically compared to last year.

 there is some new projection about how high oil prices are going to go or how the U.S. economy is slipping deeper into a recession; some have even begun comparing the current state of the economy to the Great Depression. This article will show the hopeful silver lining to that cloud over Wall Street.

Crude Oil: Oil prices are up about 85% year over year and the main reasons being cited are the supply/demand discrepancy, the weaker dollar, political unrest, and the fact that emerging economies are drastically increasing their demand. We will look at each factor individually, but we do realize that each affects the others as well.

Down goes Stokes, down goes Stokes... It doesn't have quite the same ring to it as Howard Cosell's "Down goes Frazier" line referring to the 1973 World Heavyweight Championship. However, it is what InBev is trying to do the Board of Directors for Anheuser-Busch (BUD) in an effort to move along its $44.2 billion (65 per share) offer for the St. Louis brewer.

On July 7, InBev announced that it intends to file a preliminary consent solicitation statement with the U.S. Securities & Exchange Commission to remove the board of Anheuser-Busch [AB] and give AB's shareholders a chance to vote on the potential takeover. InBev said that this move will provide AB shareholders with an opportunity to have a direct voice in the proposed combination of the two companies. InBev is proposing that Marjorie Bowen, Adolphus Busch, G. Peter D'Aloia, Ronald Dollens, James Healey, John Lilly, Allan Loren, Ernest Mario, Henry McKinnell, Paul Meister, William Vinson, Lawrence Keith Wimbush and Larry Yost will replace the current board of Anheuser-Busch directors.

Ding Ding Ding... The two heavyweights are in their respective corners.  First, we have the champion from St. Louis, with nearly a 50% market share of the United States beer market, coming in with a market cap of $44.2 billion, Anheuser-Busch (BUD).  In the opposite corner, we have the challenger, the second largest brewer (in terms of volume) in the world, a Belgian-Brazilian behemoth that combined the work ethic of Carlos Brito's AmBev with the beer genius of Interbrew, to form InBev.

InBev threw the first punch with its $65 share offer, but Anheuser-Busch [AB] counters with its own combination; rejecting the acquisition offer and outlining a plan to increase its shareholder value.  We have previously said that the combination would be good for both parties involved, but that the AB's Board of Directors would reject the offer and that InBev would be forced to attempt a hostile takeover.  InBev has yet to make that desire public, but we feel this rejection is only round 1 of a long fight. 

Follow the yellow brick road

Follow the yellow brick road

We're off to see the wizard

General Motors (GM) announced on June 18 that it was delaying the redesign of SUVs and full-size trucks, which include the Chevy Silverado and Cadillac Escalade, as it undergoes a wider review aimed at building lighter, fuel-efficient vehicles.  The shift in focus would hit General Motors' North American profits and slow its revenue for at least the rest of 2008.  Looking at the auto industry right now, it seems that the leaders are finally beginning to "get with the times" and are ceasing what worked yesterday. The announcement follows a trend in Detroit of shifting from the higher margin light truck and SUV sales that have kept it afloat for so long towards lighter, more fuel-efficient vehicles.

Here's to you, Belgian/Brazilian Beer Maker. You don't let a little thing like a CEO get in the way of what you want. August Busch IV said "not on my watch," but you didn't listen. So grab a cold Bud Light as you attempt to become the largest brewer in the world, producing more than 10 billion gallons of suds.

After the closing bell on June 11, it was reported that Belgian/Brazilian giant InBev made an unsolicited $65 per share offer for Anheuser-Busch (BUD). With more than 713 million shares outstanding, the bid is valued at more than $46.3 billion. AB's board of directors will evaluate the proposal and make its decision to InBev's proposal "in due course." The $65 per share price is a roughly 24% premium to Anheuser-Busch's closing price of $52.58 a share May 22 this year, the day before a Financial Times blog cited anonymous sources who said InBev was preparing its bid for AB.

During market hours on June 3, the U.S. automakers reported auto sales for the month of May. And the results were dismal. This shouldn't come as any great surprise as the reasons for the sharp declines have been all over the newscasts, newspapers, and websites around the country for a quite some time.  Higher gasoline and food prices are being blamed the most for the drop in auto sales.  Additionally, the worst performing area for May's sales were trucks and SUVs.  Please try to control your surprise at that last line.