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The Second Half Auto Industry Recovery Won't Happen

|Includes: DDAIF, F, GM, GMA, Toyota Motor Corporation (TM), TTM

Unfettered optimism is nothing new for the auto industry. There is a long history of quotes like “we will return to profitability on XXXX date” and “the (insert model name here) will be the biggest hit vehicle ever”. If you go back to industry SAAR projections made by the so-called “industry experts” for 2008, you will see how they never saw the auto industry collapse coming. Now that half of 2009 is in the books, SAAR projections by virtually all OEM’s, stock analysts and industry experts are calling for a modest second half recovery. Ford and Toyota have even boosted production in anticipation of this recovery.   I would like to know what they are seeing, because just judging from the macroeconomic environment, I just don’t see it. Cash for clunkers will have a very limited impact when you look at the numbers. Consumer confidence and unemployment are still going in the wrong direction. People are clearly not going to buy a new vehicle if they suspect they may be unemployed in a month. Leasing and financing for people of all credit profiles is a thing of the past.  There is just no compelling reason to forecast a recovery of any sort. Have some people delayed buying a new car but really need one, absolutely. But who’s to say they have to buy one this year? Cars last longer today than they ever have making it much easier to hold out. 

So if you’re banking on a second half auto recovery, use caution. The industry experts have been very wrong before and I fear they are falling back into their old optimistic ways.      

Disclosure: Long TM