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  • September Auto Sales Sashay By: David Silver
    September Sales Sashay
    By: David Silver, Research Analyst
     
    Looking back at September auto sales there are two things to keep in my mind. First is that it is cycling an “easy “ comparison going up against the hangover month of September 2009, the month following the cash for clunkers program. Second is that data has pointed to a weakening economy, or at least an economy that saw its growth rate fall from the first six months of the year. We fully expected to see mid-teen to low 20’s percent growth compared to the previous September, however, the biggest surprise in our mind was Chrysler. Last year, the Company was one of the biggest losers from the cash for clunkers program as the Company doesn’t have many small, more fuel efficient vehicles. As a result, the “hangover effect” was relatively muted and the 60.9% growth blew away my expectations (+34.1%). Additionally, while there is historically a drop from August to September sales, Chrysler was able to keep sales rate flat from the previous month. Taking a look at the rest of the industry it was another so-so quarter, with sales dropping from August for most companies. Ford and Chrysler (and a select few luxury brands) were the only two to see sales improve from the previous month. A portion of the benefit during the month (for the industry) can be attributed to the Labor Day Holiday. Yes, Labor Day always falls in September, however, it was so late this year that sales were not likely to be pulled forward into August. 
     
    Company
    Vehicles
    Change Y/Y
    Change M/M
    Year to Date Change
    General Motors
    173,155
    10.5%
    (6.5%)
    6.0%
    Ford Motor Company
    160,873
    40.8%
    2.1%
    18.7%
    Toyota Motor Company
    147,162
    16.8%
    (0.8%)
    1.2%
    Chrysler
    100,077
    60.9%
    0.5%
    14.6%
    Daimler
    20,666
    16.1%
    5.0%
    13.1%
    Volkswagen
    19,943
    14.9%
    (12.7%)
    21.0%
    Nissan Motor Company
    74,205
    34.0%
    (3.4%)
    16.1%
    Honda Motor Company
    97,361
    26.1%
    (10.5%)
    3.2%
    Hyundai
    46,566
    47.8%
    (13.1%)
    20.0%
     
    Auto makers sold 958,966 cars and light trucks last month compared to 746,104 a year ago, according to researcher Autodata Corp. Year-ago sales were damped by the end of the U.S. government's "cash for clunkers" incentive program.
     
    Chrysler sold 100,077 vehicles in September. It was the sixth consecutive month Chrysler reported a year-over-year increase in sales, and the second in 2010 that sales exceeded the 100,000-unit threshold. Chrysler has sold 820,220 vehicles year-to-date. The auto maker needs to sell 280,000 vehicles over the next three months to hit Chief Executive Sergio Marchionne's target of selling 1.1 million vehicles in the U.S. in 2010. Ford truck sales jumped 43% while sport-utility vehicles surged 61% and cars climbed 40%. In one of the best signals for the economy, truck sales are 28.9% higher through the first nine months of 2010 compared to 2009.  
     
     
     
    This was just one of those months; it wasn’t too good but it wasn’t too bad. The Labor Day holiday was relatively strong for the Company (especially when compared to 2009), but it was a quarter that neither proved nor contradicted the trends that have been occurring over the past few months. There were pockets of strength, but then again, there were pockets of weakness. It appears that many automakers are just trying to bide time before some new models hit the market over the next few months.
     
    IPO Update
     
    This month did little to help make General Motors more attractive for the potential IPO. The road show to stimulate interest in the eventual sale of General Motors to the public is set to get underway anytime now; however, there are still plenty of risks that could prevent a successful IPO. Rumors lately have been that the IPO level will be approximately $8-$10 billion. We had hoped that the government’s stake (61%) would be reduced by approximately $8-$10 billion, but it seems that the government is likely to only liquidate approximately $4-$6 billion. I still wouldn’t be a buyer of this new IPO. The hope is that the Company will IPO during November after the midterm elections.
     
    The other of Detroit’s Big Three that entered bankruptcy, Chrysler, has also been knocking around the IPO idea. CEO Sergio Marchionne indicated that it would probably be in a piecemeal fashion. Mr. Marchionne has been relatively on point since being named the CEO of Chrysler and Fiat. Chrysler continues to flounder without a product lineup that includes the smaller more fuel efficient vehicles. The Company did well during the month of September as SUV and light truck sales were on the rise. However, another spike in fuel prices and sales of the Cherokee, Ram and Charger will suffer. The Fiat 500 and the Alfa Romero are slated to be released in the states but they are entering a relatively crowded marketplace. Chrysler doesn’t face quite the international pressures that General Motors does which could make it slightly more attractive come IPO time. That being said, we don’t expect the Chrysler IPO until the middle of 2011.
     
    Disclosure: Ford (F) Long
     
     
    Disclaimer: All investment entails inherent risk. Wall Street Strategies' research seeks to assist investors in determining when to buy and when to sell to attempt to maximize profits or minimize losses. All final investment decisions are yours and as a result you could make or lose money. Wall Street Strategies, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed. Wall Street Strategies, its employees and/or affiliates do not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Wall Street Strategies sit on the Board of Directors of any covered company. The analyst does not own shares in any of the companies listed above. Wall Street Strategies is not a broker/dealer, and the firm does not underwrite securities, manage assets or provide investment banking activities. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security.


    Disclosure: F Long
    Tags: F, TM, DDAIF.PK, HMC, VLKAF.PK, Auto Sales
    Oct 05 3:53 PM | Link | Comment!
  • Is The Glass Half Full or Half Empty By: David Silver
    As we approach the end yet another month (by the way, 2010 seems to be flying by, it is about to be October!), auto sales releases are just around the corner. From some of the dealerships I speak with around the country, the month has been “one of those months.” When I asked about what type of sales they were seeing compared to the same time last year, dealerships were positive, bragging that even despite the cash for clunkers program, they are still seeing higher sales. However, when I bring up the last few months, their mood takes on a much more somber tone. Since topping out in April and May of this year, auto sales have been trending down as the strength of the economic recovery was questioned and the fear that another wave of job losses would afflict the country increased. 
     
    On the bright side, dealerships haven’t been offering more incentives to get more customers in the door, which bodes well for the financial durability of both the automakers and the dealerships. According to Edmunds.com, the average manufacturer incentives are estimated at $2,595 for each vehicle sold in September, down $106, or 3.9%, from last month, and off $151, or 5.5%, from September 2009. The headlines this morning are taking the positive approach, that despite seeing growth rates continue to fall, auto sales are expected to have reached the highest level since March (only May had more sales) with more than 11.7 million vehicles sold.
     
    The weakness in the economy has pressured sales over the past few months, and all indications are that that weakness will continue. The following table outlines our expectations for the month of September compared to both September 2009 as well as August 2010. We are expecting the month to bounce back from the previous year; however, we are expecting that total sales during the month of September will be lower than that of August 2010.  
     
    Company
    Expectations
    Y/Y Change
    M/M Change
    General Motors
    180,923
    16.2%
    (2.3%)
    Ford Motor Company
    154,468
    35.2%
    (1.9%)
    Toyota Motor Company
    147,717
    17.2%
    (0.5%)
    Chrysler
    83,406
    34.1%
    (16.3%)
    Daimler
    19,245
    8.1%
    (2.2%)
    Volkswagen
    19,825
    14.2%
    (13.3%)
    Nissan Motor Company
    71,022
    28.2%
    (7.6%)
    Honda Motor Company
    93,611
    21.2%
    (13.9%)
    Hyundai
    41,346
    31.2%
    0.3%
     
    The industry is far from healed, but the companies seem happy with the current growth rates, especially considering the difficult comparisons that they will be cycling for the next few months.
     
    Disclaimer: All investment entails inherent risk. Wall Street Strategies' research seeks to assist investors in determining when to buy and when to sell to attempt to maximize profits or minimize losses. All final investment decisions are yours and as a result you could make or lose money. Wall Street Strategies, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed. Wall Street Strategies, its employees and/or affiliates do not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Wall Street Strategies sit on the Board of Directors of any covered company. Wall Street Strategies is not a broker/dealer, and the firm does not underwrite securities, manage assets or provide investment banking activities. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security.


    Disclosure: F Long
    Tags: F, TM, VLKAY.PK, DDAIF.PK, HMC, Auto Sales Preview
    Sep 30 3:10 PM | Link | 1 Comment
  • New CFPB Already Under Fire By: David Silver

    Later today, President Obama is expected to announce that Elizabeth Warren will oversee the creation of the new Consumer Financial Protection Bureau (CFPB).  The Dodd-Frank financial overhaul law was enacted back in July, creating the CFPB and revamping regulations across the financial sector. The CFPB has broad powers to write and enforce rules related to credit cards and mortgages. In creating the agency, regulators consolidated powers from several other existing agencies, such as the Federal Reserve, and the process of moving these powers and personnel is what officials are expected to spend the next 10 months doing. The government is also setting July 2011 as the deadline for the new agency to be up and running.

    It is unclear what Ms. Warren's role would be after the agency is up and running. The law says only the director, a position that needs to be confirmed by the Senate, can write the rules and guidelines issued by the agency. The White House could still decide to nominate Ms. Warren for the five-year slot as director. However, in an interesting move, President Obama has decided to skip the confirmation process for Ms. Warren off the bat.  Seems to me that for the CFPB to run properly it probably would be a good idea to have the same person that designed the solution there to help troubleshoot the problems that will arise over the first few years, I mean we are talking about another government agency after all.

    David Hirshmann, who runs the Chamber of Commerce's Center for Capital Market Competitiveness said the following, "By not allowing Ms. Warren's nomination to be considered through the regular order of the full Senate confirmation process, the administration has circumvented one of the very few checks on a big new agency that already has been given an unprecedented concentration of regulatory powers. This maneuver is an affront to the pledge of transparency and consumer protection that's purported to be the focus of this new agency." I don't know enough about Ms. Warren to have an opinion, but it seems a bit odd that the point of this agency is to improve the transparency of operations for banks, credit cards, and mortgages, however, the Administration is ignoring one of the few rules it will face.  Even people in favor of the CFPB were mixed on the actions taken by the Administration. David Arkush, who runs a Congressional transparency project at Public Citizen, a left-leaning advocacy group, said it was disappointing that a formal nomination did not appear imminent. "Warren is confirmable, and a fight over her confirmation is worth having," he said.
     

    Tags: CFPB
    Sep 17 1:31 PM | Link | Comment!
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