Even Goldman Expects Post Cash For Clunkers Hangover
Goldman Sachs, which disagrees with Edmunds' expectation for an 8.8 million September SAAR, has shared its own projection of 9.3 million. Even so, the drop from the 12.5 million in September 2008 and the 14.1 million in August, is dramatic. What is scary is that there is no indication October will be any better. The only new initiative launched by Detroit: 60 day money back guarantees. Will that stimulate car sales, or simply end up as a bureaucratic nightmare for dealers, is still unknown. Although rental companies, those Chinese rockets like Hertz and Avis whose stocks have gone up by about 10,000%, will very likely not be too happy that GM has now also entered the "rental" car business.
September’s US light vehicle sales will be reported on Thursday, October 1. We expect a seasonally adjusted annual selling rate (SAAR) of 9.3 million units in September—well below the 12.5 million reported in September 2008 and below the 14.1 million reported in August 2009. The expected big decline in September’s sales will be driven mainly by the hangover effect associated with the Cash-for-Clunkers program (C4C), which ended on August 24. Very low inventories also probably contributed to the decline. According to Ward’s, total US inventories were only 29 days as of August 31, well below the 65-day normal level. Numerous sources such as Edmunds, Automotive News, and Ward’s have also reported that consumer traffic at auto dealers plummeted when the C4C program ended. Ward’s expects the September 2009 SAAR to be 9.5 million, and Goldman Sachs Equity Research is expecting a SAAR of 9.3 million. For FY2009 and FY2010, we continue to forecast a 10.5 million and 11.7 million unit US light vehicle SAAR, respectively.
Yet even according to Brian Jacoby, nothing good awaits the Big 3 (or is that one and a half/three quarters? What kind of haircut do 363 Sales represent to pre-bankruptcy integers?)
We expect the D3 to report the following September sales: GM down 40% yoy, Ford down 7%, and Chrysler down 49%. Ward’s expects GM to be down 47.3%, Ford down 9.9%, and Chrysler down 49.1%. Our equity research team expects GM to be down 39%, Ford down 2%, and Chrysler down 45%.
The most relevant point discussed by Goldman is that the auto industry is once again restocking and absent a substantial pick up in demand (good luck if no CfC 2.0 is implemented), the inventory glut is poised to repeat itself as soon as H1 2010.
CSM is forecasting 2H2009 North American (NA) production of 5.09 million units, which is up 46.3% sequentially. The increase reflects the rebuilding of dealer stocks. For 3Q2009, CSM expects NA production to fall 20% yoy, but then rise 1% yoy in 4Q2009 (see Exhibits 1 and 2). Regarding Ford, we expect the company to produce 495,000 units (up 18% yoy) in 3Q2009 and 570,000 units (up 33% yoy) in 4Q2009.