Bailout Watch 582: September Sales Crater. Now What?

Speaking in Frankfurt, Fiatsler boss Sergio Marchionne warned the world that post-Cash for Clunkers American auto sales are a “disaster.” Like you didn’t see THAT one coming. Sergio reckons the industry benchmark—the Seasonally Adjusted Annual Rate (SAAR)—will fall below the “conservative” 9.5 million SAAR estimated for September. Folks, that’s after August’s 14.1 million number. “Even GM’s Fritz Henderson has thrown in the towel,” iStock Analyst reports, “saying that September will be a ‘very weak’ month.” Me, I’m with Sergio. The September numbers will be so bad that Michael Moore’s rendition of Bob Dylan’s “The Times They Are a Changing” may even be on Bob Lutz’s iPod. Just kidding. But seriously, what now?

iStock takes stock and wonders . . .

We are not sure yet how the MSM will prepare the public for the collapse that is now expected in auto sales when they are reported in the first days of October. The bigger surprise is why the auto industry is not following in the footsteps of Senator Isakson and demanding not only yet another extension to Cash For Clunkers but also an expansion. At this point there is no point in the government pretending it is not subsidizing any and all industry.

You will remember, of course, that the last time the sky was falling in, the federal government spent over $100 billion rescuing GM and Chrysler (and Ford; but shhh, we don’t talk about that). The big question is: will Uncle Sam re-up? Will another $100 billion-plus of your hard-earned taxes disappear down a Detroit-shaped rathole?

This is, of course, a political calculation. And there’s no question that the political forces ranged against Bailout Nation are better organized and less patient than before. We could see a major battle—THE major battle—form around a Chrysler/GM triple dip.

To avoid that possibility, especially in the run-up to mid-term Congressional elections while still doing something—’cause we have to do something—renewing Cash for Clunkers is a logical step. The Cash for Clunkers “success”—i.e., its adoption without political wrangling or damaging Glenn Beckian scrutiny—begs for a repeat performance.

Which raises an uncomfortable question that iStock faces head-on (apply palm directly to the forehead):

As David Rosenberg and other economists have speculated, the government accounts for 80%, if not more, of all the “growth” experienced in the economy. The issue is that, as any first year analyst at an investment bank will attest, all such comparable stimuli are considered “non-recurring” unless of course, they become, “recurring.” But at that point the economy is effectively one based on central planning: the key construct in any Communist/Marxist economic model. Which, (un)fortunately, is where the US is now and will be for an indefinite amount of time.

Meanwhile, what WE want to know: can GM’s current crop of Old GM incompetents (i.e., their management) survive September’s sales news? They will, no doubt, point to everyone else’s sinking sales and say, see? Not our fault. Again. Still. But that one is getting old, and somethingmust be done. Look for heads to roll—especially when Chrysler and GM’s cash burn is exposed. IF it’s exposed.

Why wouldn’t it be exposed? Didn’t Fritz Henderson pledge, under oath to the U.S. Senate, to maintain transparency on all things GM? Why not face the truth? Now there’s a question for the new, “transparent” GM . . .