Credit Suisse: '09 U.S. Car Production at 10.6m Units

Robert Farago
by Robert Farago

* Light vehicle sales tumbled 18% in 2008, to 13.2 million units from 16.1 million in 2007, with the selling rate deteriorating significantly in the second half of the year, finishing with a barely-breathing 10.3 million SAAR in Q4.

* Sadly, it looks like 2009 will be even worse than 2008. Our latest forecast for 2009 US light vehicle sales is a shade under 12.0 million units, which is down from our earlier forecast of 13.0 million, and down another 9% versus 13.2 million in 2008.

* North American light vehicle production in this scenario should be in the range of 10.6 million units, down about 13% vs. 12.2 million in 2008, reflecting the sequential decline in sales, as well as an oversupply of vehicles remaining on dealer lots at year end. The year-to-year drop in production should be even more pronounced for the Big 3 (about 19%).

* If there is any good news here, it is that the shape of things should be better in 2009 than in 2008. In other words, we expect the exit rate of sales in 2009 to be better than the entry rate. The exact opposite was true for 2008.

* But settling in at a 12.0 million sales pace in 2009, even after running in the low-10s in the fourth quarter, will not be enough to invigorate the stocks, in our view.

* Indeed, the Big 3 and many suppliers will still be burning cash in a 12-million market, especially considering that the drop in production will be more pronounced than the decline in sales.

* Revisiting our sector thesis from last year, we note that auto stocks – particularly the OEMs, and in this case we would include Big 3-dependent suppliers – generally do not work during or after recessions until US vehicle sales start to trend meaningfully higher. And going sideways from 13.2 to 12.0 (even with a 10.3m quarter in between) is not going to cut it, in our view.

• We maintain an Underweight stance on the group.

Robert Farago
Robert Farago

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  • Eh_political Eh_political on Jan 14, 2009

    @ Menno: And now BO and his like want to simply redistribute what we’ve worked hard for to lazy no-accounts who think it’s hard work to go turn in their welfare checks, as well as GM, Chrysler, a bunch of billionaires in banks (sorry) and AIG insurance company. I must say it's the current administration that has already done that. BO is going to do everything he can to stop a runaway train, and it doesnt look good. According to Krugman, America will have to inflate its way out of this mess--and do many other distasteful things as well. If you want to take your personal experience up a notch, imagine how all Canada feels with regard to poor financial regulation and a cartwheeling American economy. We cleaned up our act economically, ran a decade of budgetary surpluses and learned to live within our means. Now we are right back into deficit spending too. Seriously fucked if you want the technical term. My instincts are that BO will be more effective. I am not confident that the American economy is sufficiently mixed at the moment, but it may be again. And that will require massive government intervention, spending, re regulation and prosecution. While temporarily satisfying, allowing massive companies, and the entire financial sector to fail would prove disastrous, and has a whiff of the apocalyptic to it. First put out the fire, then deal with the culprits. One could equally argue the Nazis were never properly punished for their inhumanity. They were beaten however, and it built national character and a collective sense of purpose. The cost was atrocious. My own personal act of vengeance is to be in a relationship with a mathematician who evaluates risk, primarily in corporate bonds. As someone who escaped by the skin of his teeth from ABCP in August 07, I exact my revenge on subprime shenanigans with subpar lovemaking. Booyah!

  • Anonymous Anonymous on Mar 02, 2009
  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
  • Oberkanone Where is the value here? Magna is assembling the vehicles. The IP is not novel. Just buy the IP at bankruptcy stage for next to nothing.
  • Jalop1991 what, no Turbo trim?
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