CS FirstBoston: GM Headed for a 40% Jan. Sales Drop

• We expect the annualized light vehicle selling rate (SAAR) to run in a range of 10.0 – 10.3 million units in January, the midpoint of which would be about 34% below the year-ago pace of 15.4 million, and a little softer than last month’s pace of 10.3 million.

• Unit volume (selling day adjusted) should be down in a range of 35% – 37% versus January 2008, compared to a decline of about 35% in 4Q08. The seasonal factors are favorable this month, which explains how unit volume could be down more than the annualized selling rate.

• The industry faces significant sequential and year-over-year sales headwinds from lower daily rental deliveries in January. Demand from rental car companies is weak; but the decline in deliveries will be exacerbated by severe production declines in January as daily rent vehicles typically turn quickly from production to delivery.

• By maker, we see GM sales down in a range of 40% – 42% year-to-year, with market share dipping to around 22% or less, compared to share of 24.4% in December, and versus 23.9% in the year-ago month. We see the sequential decline in share as partly driven by fewer daily rent deliveries.

• We look for Ford sales to be down between 31% – 33% in January, with market share landing at around 15%, up modestly from the 14.9% share posted in December, and up from 14.1% in January 2008. The new F-150 should give Ford a boost relative to GM, as it has taken share over the last several months (though partly owing to clearing out the old model year).

• We expect the light truck mix to take a breather in January, declining to around 51%, from 52.7% in December. In addition to the average gasoline pump price edging higher this month, it is normal for the truck mix to decline from December to January.

• We think Big 3 inventories are likely to end January about 23% overstocked. Specifically, we see GM dealer stocks ending the month about 25% overstocked, and we see Ford ending January about 10% overstocked. This is consistent with our forecast calling for March-end inventories to be at or below normal levels at GM and Ford, based on deep Q1 production cuts.

• Based on our full-year sales forecast of 12 million units, we’re clearly looking for sales to ride an upward trajectory in 2009. However we don’t expect annual sales of 12 million vehicles to be enough to get the stocks working in this group. For more details see our 2009 outlook report from January 13, Sideways Is Not Good Enough; US Sales to Stabilize at 12.0M in 2009.