By on February 5, 2009

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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12 Comments on “If It’s January, We Must Have Hit Bottom...”


  • avatar
    SegwayCop

    I’m with Ed.
    It begins and ends with the two biggest assests people have: A job and a home.

    Companies are increasingly throwing people into the street. No money coming in, no new car, no bottom.

    If there is no money to be pulled out of homes through refinancing, again, no money, no new car, no bottom.

    Tax payer bailouts allow the connected to exit their positions before the ultimate collapse. Only then we can all say “Bottom!”.

  • avatar
    fisher72

    Bottom, how about false floor?

    I just keep seeing lay-offs and companies dissolving complete divisions. Grasping at anything they can to survive. Or how about month long lay-offs of an entire professional consulting company for January, and I am not talking about Crysler!

  • avatar
    autonut

    From point of view of economy, we are probably facing harsher times in the future. As an optimist, I’d say the bottom is ahead of us.

    As far as domestic auto industry, we are in bottomless pit called government subsistence and took how many years to rid of Federal welfare?

  • avatar
    RetardedSparks

    I think the biggest problem is not the idea of “bottom” – many people think the 10M -11M annual sales rate for January is about right for the forseeable future – it’s that the bottom is really the top!

    All the manufacturers who can be profitable at 10M sales please raise your hand.

  • avatar
    OldandSlow

    They may not be profitable in a year 10M sales, but they need to be or it’s going to be the great Studebaker / Packard City in the Sky for those that don’t.

  • avatar
    RobertSD

    Well, look at it from this perspective: retail demand has been down ~30% every month for the last four months. That feels like a bottom. The only real fluctuating variable is fleet volume – but, ironically, the manufacturers have a lot of control over that. February will see much healthier fleet volumes because factories are actually running. I have Feb coming in at a 10-10.2M SAAR. I see March at a 10.4-10.6M as more plants are back online. I think Q2 is headed right for 11M or so. Q3 and Q4, though, may benefit from some economic recovery and pent up demand. I’m sticking with my 11.7-11.9M forecast.

    Yes, January feels like the bottom. Not to say that what’s ahead is a party – but after six months of just complete pain, what businesses need to see is a stablizaton.

  • avatar
    Seth L

    The problem with calling anything, especially light at the end of the tunnel, is that this is a unique situation. Sure there are parallels in the past, but I don’t think normal data plots can accuratly project what’s going on right now.

    There’s lots of new variables that I don’t think can be called with any consistency.

  • avatar
    SunnyvaleCA

    Mr. Dederer’s “The Truth About Cash for Clunkers” article has a few points relative to this one:
    * “cars hold their value much better than other major markets”
    * “the US has 250 million cars for 200 million licensed drivers”

    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.

  • avatar

    >>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.<<

    So True. I was thinking that today, that most folks in my area have a new (er) car. It might go the gamut from S Class to Cobalt, but it is pretty new.

    The “poor” folk are driving 99-04 vehicles, where the new has warn off, and there are a few parking lot dings, but if you froze all new car making for a year, I’m going with no one would be walking.

  • avatar
    NickR

    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.

  • avatar
    philipwitak

    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

  • avatar
    ronin

    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.

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