If It's January, We Must Have Hit Bottom

Edward Niedermeyer
by Edward Niedermeyer
if it s january we must have hit bottom

Or so goes the logic of Brent Snavely and friends over at the Detroit Free Press. Sales down 37.1 percent? The lowest seasonally adjusted annual selling rate (SAAR) since 1982? No way is it going to get worse before it gets better! “This is not real. This is artificially low,” says Jesse Toprak, executive director of industry analysis for Edmunds.com, who goes on to warn that “the industry might not recover without some sort of external stimulus.” Not here, not now! And yet in the midst of all this turmoil, a strained and unconvincing optimism abounds. Well, at the Freep anyway . . .

After all, GM’s fleet sales were down 80 percent, but retail sales were down only 38 percent in January. And now that Chrysler Financial has government cash, it can actually compete for the depressed retail market instead of relying on the cratering fleet market. Oh yeah, and Ford’s share of the tanking market is improving. So things must be getting better, right?

Wrong. This Donner Party optimism (tastes like chicken!) is not being reflected in any of the larger economic indicators. It also ignores the fact that the Detroit firms were sick puppies even in the good economic times.

Besides, the thesis implies that a sales recovery (and not further tranches of federal sugar) will save GM, Chrysler and Ford. Which is probably the point. With round one of the bailout yielding only falling sales, some glimmer of light at the end of the tunnel is necessary for round two. Unfortunately that light is an oncoming freight that’s showing no signs of slowing.

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4 of 12 comments
  • Speedlaw Speedlaw on Feb 05, 2009

    >>There are people who need a car for their daily activities, but there are so many extra cars and underutilized cars that a healthy used car market could fill all demand for several years. Nobody really needs a new car.

  • Nick Nick on Feb 05, 2009

    I was laid off Monday at 10 to 4. (10 minutes before an 1.5hr conference call with a client, oddly enough.) Count me out.

  • Philipwitak Philipwitak on Feb 05, 2009

    nobody really knows what the future holds - it hasn't happened yet. but i think everyone truly concerned about our economy and prospects for its recovery needs to realize this: despite whatever you are hearing from politicians and/or the mainstream media, our banking system is, for all practical purposes, already insolvent. whether or not our government can continue to prop it up; and for how long; and at what cost to taxpayers, remains to be seen. "...Pimco's bond fund king Bill Gross said 'What we are witnessing is essentially the breakdown of our modern-day banking system'..." and then there are the derivatives markets. completely unregulated. totally opaque. it has been estimated by some knowledgeable, respected financial sector insiders as having assets originally valued at more than $500 trillion - but how much of that remains good; and how much of that is already toxic; and how much of that is still teetering on the brink? i get no pleasure from being the bearer of bad news, but the big picture does not look good for many of us. for an enlightening/frightening overview on derivatives, read paul farrell's wall street journal / marketwatch article referencing gross and warren buffett, which i have linked below. http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/story.aspx?guid=%7BB9E54A5D-4796-4D0D-AC9E-D9124B59D436%7D

  • Ronin Ronin on Feb 06, 2009

    MSRP of Detroit cars is higher than it was a year ago. Incentives are less than they were even three years ago. Yet unemployment is higher, reductions in pay and benefits are higher, and credit is tighter. Not only are Detroit products effectively more expensive, but the willingness and inability of consumers to buy those products is less than before. Therefore, why not call a bottom- in fact, let's declare the greatest sales year ever. But no need to go there. Let's look at this predictor's record. What were the predictions a year ago, and how did they pan out? The year before that? If they were at all wrong- and I can guarantee you without looking that they were most definitely wrong- then their credibility right now is not even worth discussiong.